As I introduced in my blog post back in March , VAT preparation and submission is due to go digital in April 2019. But what does that mean in practice, for business owners like yourself? In this post I want to explain the main three things that you should know ahead of the change.
1. Many business owners don’t know about Making Tax Digital for VAT
Depending on who you ask, the amount of business owners that have not heard about Making Tax Digital varies between 20% and 40%. So, if you are reading this you can take yourself out of the ‘uninformed’ group. Many businesses already use the services of a finance professional such as an Accountant or a Bookkeeper. However these figures surely indicate that some of them aren’t informing their customers about this very significant change. Given that we are now less than a year away, this needs to change, and fast.
All of our existing clients were told with over a year to go. Any new business owners that I talk to get told about it whilst we are chatting. We are also planning on running some workshops for Making Tax Digital for VAT in the Autumn of 2018. This is so that business owners know what will be expected. The workshops will cover what is changing, why and how.
2. Digital VAT will be piloted and tested fully before roll out
The VAT Pilot for Making Tax Digital (MTD) is now in full swing. Many small and medium businesses are already submitting their VAT returns this way. Through software such as Quickbooks and Xero they are submitting their figures derived from the sales and purchases of the business. These providers have developed integrations in their software with the HMRC portal. This is totally different to a lot of other HMRC system roll outs of the past. Previously they have been lengthy, expensive and frustrating for businesses. For those businesses in poor bandwidth areas, HMRC have an answer. Thave stated that only 2MB is required to be able to use the system. The Government is also investing additional funds in improving access to fibre broadband across the country. This can only be a good thing for businesses if they are getting this investment from the government.
3. It may be easier than you think to submit your VAT return.
If you are already using a cloud based (ie. online) accounting system, you are in luck. These systems will already be ready, or will be before the VAT MTD deadline of 1st April 2019. This includes QuickBooks Online, Xero, Sage Accounts/Financials and Kashflow. You or your agent may already be submitting your VAT returns from the software each quarter. The software provider will provide any necessary updates or patches to the systems if they are required to be fully MTD compliant. If you are using a desktop-based software the likelihood is that you will need to move away from this. This is especially the case if it is a version that is more than a year old.
If you would like more information about your current software and whether it will be compatible, you can speak to us free of charge. There are multiple options available to suit your business and we can help you to decide on the best fit for your business. Even if you want to keep doing your books yourself, we can help you get set up with both your software and your new online account.
In summary, with less than 9 months to go it is something we need to be thinking about now. Not something to be thinking about later. This is why we are running free workshops on the subject from the Autumn. We also have put a full 10 point guide in our free e-book on the website here .