This site uses cookies to improve your browsing experience and analyse use of our website. By clicking ‘I accept’ you agree and consent to our use of cookies. You can find out more about our cookies here. Find out more

Making Tax Digital for VAT: how Moore can help you prepare

Louise Hastings

From April 2019, VAT registered businesses with turnover above the VAT threshold (currently £85,000) will have to:

•    Keep their records digitally for VAT purposes
•    Submit their VAT return information to HMRC through Making Tax Digital compatible software

This means that businesses within the scope of MTD for VAT will have to use accounting software to record all VAT invoices and receipts and will no longer be able to submit their VAT return manually via the HMRC Gateway – submissions will have to be made via a compatible digital software package.

Businesses will be expected to keep all their accounting data digitally and for there to be a full digital link set up between any software used.

There are a variety of accounting software solutions on the market dependent on your needs and size of your business. The most popular for small businesses are Xero and Quickbooks Online. These packages are very cost effective and the good news is that the cost of accounting software is tax deductible.

We recommend that all affected businesses and organisations take action now to avoid being caught out by the new legislation.

What you need to do next?

Depending on your current situation, there are a number of steps you need to take in readiness for Making Tax Digital:

VAT registered businesses and organisations with turnover above the VAT threshold currently keeping manual or spreadsheet records.

Organisations in this situation have a number of options:

Option 1: Invest in a compatible accounting software package

HMRC have previously stated their intention to provide free software which will allow the upload of information, but there is no information available yet as to what this may look like or when it might be available. We recommend therefore that you invest in compatible accounting software.

As well as ensuring you’re compliant with the new legislation, there are significant advantages to using an online accounting package. Once the initial set up is complete, you may find preparing your accounts much easier, and that you have far less paperwork to keep on top of.
Spreadsheets may potentially be compliant for Making Tax Digital for VAT provided that a ‘bridging spreadsheet’ provided by HMRC is used to submit the VAT return digitally.

If you decide to purchase software, we recommend that you make the change at the beginning of your financial year as this makes the process of switching things over much simpler. Moore can help you understand which package is right for you, and we can help with installation and training too if needed.

Option 2: Outsource your bookkeeping to a third party such as Moore who can keep your records and file your VAT returns on your behalf.

At Moore (South) LLP we understand that business owners may not feel comfortable using digital technology.

We can provide the support that you need.

Moore (South) LLP have a great mix of accounting software and VAT expertise to support you in helping your business to become MTD compliant. We are currently in the process of helping our clients move their accounting records online, helping them to apply best practice processes and controls and to take advantage of the appropriate technologies.

For some owner managed businesses, MTD may be seen as a huge stumbling block, but it can also be seen as providing a good opportunity to review your business record keeping and to ‘future proof’ your systems. At Moore (South) LLP we can provide tailored guidance and training and offer bespoke support to help you turn digital.

To ensure you are MTD ready in good time before the deadline of April 2019, or to be provided with more information on the power of cloud accounting and how it can benefit your business, please contact your local Moore office, to speak to their digital accounting specialist.

We can also provide a full bookkeeping service including the preparation of management accounts, providing cash flow forecasts, and a full payroll bureau – saving you time and employment costs.

Option 3: Apply to HMRC for an exemption if applicable
HMRC have confirmed that exemptions that already apply to electronic VAT returns will be extended to cover digital record keeping requirements. Non-digital alternative channels will be provided for those considered digitally exempt.

This includes:

•    Anyone who cannot get online due to disability, age, remoteness of location or other reasons.
•    Anyone whose religious beliefs are incompatible with the use of electronic communications.

You will need to contact HMRC directly to find out how to submit your return, for example paper filing, if you cannot submit online.

VAT registered businesses and organisations with turnover above the VAT threshold already using an accounting software package.

If you're already using accounting software, the good news is that you may already be fully or partially compliant. However, older versions of some desktop software packages may not provide the functionality to directly submit your VAT return to HMRC, so you may need to upgrade your software package. (Sage 50 accounts users for example will need to upgrade to version 25).

We recommend you check with your current software provider to ensure that the package you are using is compatible with Making Tax Digital for VAT (i.e. it provides the functionality for you to submit your VAT return directly to HMRC).

If you aren’t already doing so, it’s a good idea to start to submit your VAT return directly through your accounting software as soon as is practical. It’s simpler and more efficient, and means you’ll be prepared for Making Tax Digital for VAT when the new legislation comes into effect in April 2019.

VAT registered businesses and organisations with turnover below the VAT threshold:

Businesses and organisations with turnover below the VAT threshold are exempt from the legislation, even if they are VAT registered. You can choose to voluntarily opt into Making Tax Digital but there is no requirement to do so.

Non-VAT registered businesses and organisations:

The Making Tax Digital regulations do not currently apply to businesses and organisations who are not VAT registered. However, HMRC have stated their intention to become a modern, digital service, and we anticipate that MTD will be expanded to include Income Tax and Corporation Tax returns in future (although not before 2020 at the earliest.) Therefore, as part of your future planning, you should consider moving to an accounting software package if you are not using one already.