Making Tax Digital (MTD) – The Contractor’s Guide
Making Tax Digital (MTD) was introduced in April 2019. At present MTD only applies to VAT Registered businesses with a turnover in excess of £85,000. However, additional changes are planned to be implemented from 1 April 2022. On that date, VAT-registered businesses with a taxable turnover below £85,000 will also be required to follow Making Tax digital rules.
Here is a quick guide to the main changes affecting VAT registered businesses.
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.