Most business owners in the UK will have heard of Making Tax Digital (MTD) by now, and some will be clued up about its turbulent rollout.
It was this time last year that Westminster put the brakes on its rollout of MTD for VAT-registered businesses to report income tax and national insurance contributions digitally from April 2018.
However, the initial group of businesses with annual turnover above the VAT-registration threshold of £85,000 will need to submit quarterly digital accounts from 1 April 2019 for VAT only as originally planned.
The VAT-registration threshold has been frozen until 1 April 2020, so if your business is either VAT-registered in 2019/20 or anticipates the need to register – what do you need to know?
Who will Making Tax Digital affect first?
So, we know VAT-registered businesses with annual turnover above £85,000 will be the first to go through the process of submitting digital accounts.
However, businesses with annual turnover expected to surpass the VAT-registration threshold in the next year will also need to give this some serious thought.
VAT-registered businesses with a turnover below the VAT-registration threshold will be able to choose whether or not to join MTD for VAT.
When will Making Tax Digital affect my business?
Your start date for submitting VAT returns depends on when your business’ VAT reporting quarters fall.
For instance, you will need to start reporting VAT through MTD on 1 April 2019 if your reporting quarters are at the end of March, June, September and December.
Alternatively, for months ending April, July, October, January, MTD for VAT will start for you on 1 May 2019.
And those with VAT returns quarters in May, August, November and February will begin MTD for VAT on 1 June 2019.
What technology is needed for Making Tax Digital?
You need to decide what software will suit your business, and whether a single piece of software or a set of software will be best for you.
These will be used to maintain your digital records, calculate your return and submit it to HMRC through an external application programme interface (API).
At the time of writing, the Revenue has approved 18 MTD software suppliers – with tech giants such as Xero, Sage and QuickBooks among those on the list.
How can we help?
With the countdown to MTD for VAT-registered businesses underway, you need to understand what records must be held digitally and what software will suit your business.