Making Tax Digital (MTD) – The Contractor’s Guide
Most contractors and company directors are aware of the changes due to be implemented from 1 April 2019 by HMRC. The main change, known as Making Tax Digital (MTD), is designed to make it easier for businesses to keep on top of their tax affairs although many people, understandably, are rather concerned about it. MTD will only cover VAT for now, but additional changes are planned to be implemented from 1 April 2020.
Clearly then, if you or your business is VAT registered you need to plan now. Here is our Contractor’s Guide:
- What is MTD (Making Tax Digital)?
In a nutshell manual filing of your VAT return will no longer be allowed. Whereas up to now some businesses have used HMRC online tools to file their VAT returns from 1 April 2019 all VAT Returns must be filed digitally by means of approved software systems.
- How will this affect me?
If you have been using a cloud-based system to file your VAT Return things will stay pretty much the same. However, if you have been using spreadsheets to record business transactions and then either ask your accountant to file the VAT return or use HMRC tools, you will need to change your procedures. We recommend that you subscribe to Kashflow, a simple to use cloud-based accounting software, to handle your bookkeeping. Or you may wish to use any other cloud-based software. However, there are alternatives. Please continue reading.
- Can I continue to use spreadsheets for my bookkeeping?
Yes. If you are familiar with spreadsheets and find it all too much then simply send these to us every quarter. We have the approved tools to transfer your spreadsheets into our VAT filer digitally (rather than manually). This complies with HMRC rules and may well avoid unnecessary stress on your part.
- How much will it cost?
The monthly subscription for a cloud-based accounting system such as Kashflow is very reasonable. Depending on the number of transactions the cost may vary between £10 and £15 per month but we may be able to arrange favourable rates for you. We will apply a lower charge to monitor your bookkeeping if you use cloud software. If instead you wish to continue using a spreadsheet we will continue to charge our current standard rates to file your VAT Return.
- What are the benefits?
We see the change to making tax digital as a positive development. Business efficiency should increase and your overall management of the business should improve, especially if you start using a cloud-based accounting system.