What Is Making Tax Digital?
There is new legislation from HMRC that has come about, and it means that if you have a taxable turnover that hits above the VAT threshold of £85,000, submitting your returns should be via software. VAT records should also be kept digitally for easier access. The Making Tax Digital initiative started in April 2019 with the VAT element. When you are a deferred business, however, Making Tax Digital for VAT won’t yet apply to your company. If it does, HMRC will have let you know via letter earlier in the year.
In October 2019, Making Tax Digital will apply to your business, so it’s important to know which businesses have been deferred.
Which Business Types Have Been Deferred?
Deferred businesses make up 3.5% of the total companies that must apply for Making Tax Digital. This is around 1.1 million companies. As of April 2019, the following businesses have been deferred:
- Accounting scheme users
- Businesses that need to make payments on account
- Not-for-profits that are not set up as a company yet
- VAT groups
- VAT divisions
- Local authorities
- Public sector entities
- Overseas-based traders
- Public corporations
What Does Making Tax Digital Mean For Me?
The current processes for keeping records and submitting VAT returns is changing. It doesn’t matter how often you send them in; whether monthly or annually, your current methods have to change. Digital records are essential, and the way that you submit to HMRC requires you to use functional software. It may feel frustrating to improve your processes when you’ve been used to doing something the same way for many years, but the benefits will come through in the end.
Dealing with business admin is not always easy, but utilising Making Tax Digital and submitting your VAT returns digitally can reduce errors and make you more productive. A move to digital accounting will save a business money over time while saving time spent on admin tasks.
The HMRC Letter: What Does It Say
The letter that HMRC sends out to the deferred businesses introduces all to Making Tax Digital, highlighting the importance of your VAT records being kept digitally going forward. You can refer to your tax accountants to get the tax help that you need to understand what this means for your business. You should be told that you can join Making Tax Digital for VAT early so that your business is ready on 1st October for the changes. You should consider a chat with your accountants about the changes if you are unsure about Making Tax Digital. Checking in with your software provider so that you can figure out what’s best for your business.
I Didn’t Get A Letter
If you didn’t get a letter from HMRC to let you know, you need to speak to your Exeter accountancy to see whether you are on the deferred list. Getting in touch with them sooner than later is essential for your financial future.