For most VAT registered businesses, Making Tax Digital (MTD) will first become mandatory for VAT periods starting on or after 1 April 2019. For a small minority of businesses that have more complex structures this may be deferred a further six months. However, you should not defer unless you are in prior receipt of a letter from HMRC, permitting you to do so. If you believe that deferment should apply to your business and you have not received permission, then we strongly suggest contacting HMRC immediately.
When MTD for VAT comes into force, HMRC are threatening to issue penalties to businesses whose turnover (or if on cash accounting – sales received) is over the VAT threshold and continue to submit VAT Returns via the old existing online portal.
Under the new regime, businesses will need to keep details of sale/purchase invoices (or if on cash accounting – receipts/payments) digitally. Excel spreadsheets can still be used but then to submit returns via the new portal, bridging software will be required. Alternatively, an accounts package (such as Sage or Xero) can be used to both maintain and submit. However, this would require maintaining up-to-date quarterly bookkeeping and keeping your subscription active.
If you are already using spreadsheets effortlessly, perhaps it is best for you to acquire bridging software (relatively inexpensive when compared to MTD compatible accountancy software) and use it to submit Returns.
For now, at least accountancy software is not essential, however, if the government do introduce Making Tax Digital for Income / Corporation Tax then the situation could well change. Whilst not yet essential, possessing and operating an accounting system does have its advantages such as instantly being able to produce a current Debtors List and generate customer statements making credit control much easier etc. If you are interested in purchasing accounting software at a discounted price, please speak to us.
A third option (exclusively on offer to our clients) is for us to submit on your behalf as agents, sharing the use and costs of our own bridging tool. Please contact us if you would like to know more.