According to the Institute of Chartered Accountants in England and Wales (ICAEW), with only a short while to go before Making Tax Digital comes into force on 1 April 2019, over 40% of businesses aren’t ready. Here we explain why you need to start preparing for MTD now and answer all your burning questions…
What is Making Tax Digital?
From April 2019, businesses with a turnover above £85k will have to submit VAT returns through the HMRC gateway using compatible accounting software. Known as Making Tax Digital, the initiative is the government’s way to modernise the tax system and reduce the burden for taxpayers.
The selection of MTD compatible software will depend on a business’ existing accounting package, however unless they’re on the latest version, organisations won’t be compliant with the new gateway. Although it may seem like an unnecessary burden, MTD can be more of an opportunity to review your existing accounting software with a view to becoming more agile, expand and turn the tables on larger scale organisations.
Why should I start preparing for MTD so early?
A concerningly low number of businesses have implemented, or are on their way to implementing, “functional compatible software”, in line with the government’s MTD plans. Given the time needed to review existing systems, evaluate, purchase and test new software, this is a worry. Here we share expert advice on switching early…
Avoid additional costs
Preparing to swap out the old system for the new can be a daunting task involving everything from reviewing new software options to planning, vendor management and employee adoption. And, according to the Harvard Business Review, since one in six IT projects have an average cost overrun of 200% and a schedule overrun of 70%, it’s vital you plan ahead and create a clear strategy – all of which needs time you’re running out of.
Cut the queues
With millions of businesses impacted by MTD, there will be a massive rush early next year as the remaining businesses will attempt to switch to MTD for VAT. For example, the helpline of your software vendor will very likely become busy, so will their availability. This means it’ll become increasingly more difficult to book the training your company may need to learn the new software functionality.
It’s the busiest time of the year
Perhaps second busiest after Christmas – self-assessment deadline. If you want to use an accountant to help you switch to MTD, then bear in mind that the time leading up to the April 2019 implementation date is among their busiest periods, with the self-assessment deadline occurring at the end of January, and you won’t be their only client!
Your burning questions answered…
There’s still plenty of confusion around which online accounting software will be compliant with MTD so here we answer some of your frequently asked questions and make sure you’re kept fully up to speed with the new legislation.
What if I’m using desktop accounting software?
If your software is installed on your computer and data is stored there – you will probably need to update it for MTD. Bear in mind the time constraints, the change management process and availability of your software provider. For help and advice on your MTD options contact us here >>>
What if I’m using a cloud accounting package?
If you’re using a cloud accounting software, the transition might be relatively straightforward and could involve taking advantage of feature updates, depending on your software version. Please speak to your software vendor for details on compatible versions and how to access the functionality. Contact us here >>>
What if I’m using spreadsheets for VAT keeping purposes?
If you’re using spreadsheets or other manual records, you need to adopt a software-driven approach for recording VAT details and filing VAT returns. Check out our accounting software options here >>>
What are the penalties for MTD non-compliance?
HMRC is in the process of implementing a points penalty system, where a business will gather points every time they are late submitting an MTD report. Once a points threshold is reached, a financial penalty is applied. More details via accountingweb.com >>>