Making Tax Digital – an update

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We have covered Making tax Digital (MTD) in previous editions of Agrimatters, but with major changes less than a year away we make no apology for returning to it again.

HMRC has announced that they are concentrating their resources on changes which will arise from Brexit. As a result, other policy changes including parts of MTD reforms will be put on hold until at least 2020. Crucially, the changes to the way VAT returns are submitted will go ahead as planned.

So, VAT registered businesses with a turnover in excess of the current VAT threshold of £85,000 will still be required to keep digital records for VAT purposes with effect from April 2019.

If you maintain your records using a manual system you will need to consider how you can become compliant with the legislation. Maintaining manual records and submitting your VAT Return as usual online will no longer be acceptable. Your records must be what HMRC describe as “digitally compatible”. What this means in practice is that businesses VAT Returns will have to be submitted to HMRC from software via an Application Programme Interface (API) An API is essentially the way one piece of software asks another to perform a service.

Spreadsheets as a means of keeping records will be acceptable so long as the spreadsheet can calculate the VAT return and upload it to HMRC via an Application Programme Interface.

HMRC will be providing an online tool to help businesses identify which software packages will meet their MTD needs.

In reality, this will mean either investing in some accounts software from a digitally compatible provider or, if that isn’t something you feel comfortable with, you will need to ask a professional adviser to prepare and submit your VAT return using digitally compatible software which will ensure you have complied with your legal obligations.

Could Xero help you?

• What is Xero? - Xero is a cloud based accounting software package specifically designed for small businesses.
• Real time information - Xero is all about real-time information. The dashboard gives you a current view of your cash and bank balances and outstanding bills and invoices.
• Daily bank feeds - Your bank transactions feed directly into the software, showing incoming and outgoing transactions as they happen.
• Automated bookkeeping - Purchase invoices can be automatically scanned and uploaded into your Xero data, so no manual input is required, reducing the risk of human inputting errors.
• Access anywhere, anytime - Unlike traditional desktop packages, Xero can be accessed securely from any device with an internet connection. When you need information quickly it’s always available.
• Our expertise - Our onboarding teams know Xero inside out and can get you up and running and provide any training and support you may need.

Xero is fully MTD compatible which means no compliance headaches come April next year. Speak to your usual AW contact if you would like more information.