Making Tax Digital (MTD) has now been with us since April 2019, so if you run a VAT-registered business and exceed the VAT registration threshold of £85,000 turnover, then you should be keeping digital records and using MTD-compatible software for sending VAT returns to HMRC.
For businesses with what HMRC says have ‘more complex requirements’, MTD for VAT had a deferred start date of 1 October 2019. The businesses that had a deferred start date are:
l Businesses required to make payments
l Annual accounting scheme users;
l Not-for-profit organisations that are not
set up as a company;
l VAT divisions;
l VAT groups;
l Public sector entities required to provide additional information on their VAT return;
l Local authorities;
l Public corporations;
l Traders based overseas.
The above businesses will often have complex reporting requirements often bring together data from various entities and therefore careful consideration should be taken about which MTD-compatible software will best meet their needs.
The original plan for MTD was to start mandating the self-employed and onboarding them for income tax purposes by requiring them to file quarterly returns of their income and expenditure. However, although the beta has been running for many years, it will not be mandated before 2021.
And then you’ve got corporation tax self-assessment, which as far as we are aware absolutely nothing has happened on. That again, will not be mandated before 2021.
That leaves the VAT registered businesses with a turnover under £85k which have not yet been considered for MTD. Which route HMRC will take next is anyone guess.
Despite the resistance from business and the accountancy profession to get behind MTD, the main positive must be the investment into cloud accounting products and the movement to making this the future in bookkeeping software.
More and more business owners are turning to cloud accounting software to manage their business’s finances. If you haven’t yet tried it, here are the benefits online accounting software can help your business:
l Save time with automation
Cloud accounting software automatically generates invoices, which can then be easily emailed, as well as reminders to help keep on top of your debtors.
l Work from anywhere
With an internet connection cloud accounting software means you no longer need to worry about maintaining spreadsheets or installing a programme on one machine. The cloud allows you to log in to your business’s account anywhere with an internet connection.
l Up-to-date data
Automated bank feeds allow you to keep track of your business’s balance sheet in real-time. You can also view a variety of reports that give an up-to-date snapshot of your business finances. Online accounting software makes it easier to get closer to your business and gives you a clearer picture of your finances as a whole.
l Collaborate easily with your accountant
In the past, it was common for business owners to chat to their accountant once a year at year-end. Cloud accounting software lets you share your accounts with your accountant throughout the year and work together regularly.
Should you be considering cloud accounting we would advise you contact your professional advisor to discuss your options and make sure you choose the best fit for your business.