From 1 April 2019, the government’s major Making Tax Digital programme has become law for over one million VAT-registered businesses earning more than £85,000.
The new rules, first announced in 2015, will mean most businesses above the VAT threshold will need to keep their records digitally. As well as submitting their VAT return using MTD-compatible software for VAT periods starting on or after 1 April.
MTD will make it easier for businesses to get their tax right first time. HM Revenue and Customs (HMRC) has been urging businesses to get ready and has already written to every business affected with information on what they need to do.
Almost 100,000 businesses have already signed up to the new service. More than 4,000 businesses are now signing up to MTD every day to experience a more integrated approach to business and tax.
HMRC knows businesses will need time to become familiar with the new requirements. During the first year of VAT mandation, HMRC will take a light touch approach to penalties by not issuing filing or record keeping penalties where businesses are doing their best to comply with MTD.
What businesses need to do now
If you have not prepared, do not panic. 1 April is not a ‘cliff edge’ for sign-ups – the first returns under the new system for the majority of businesses, which file VAT quarterly, won’t be due until August at the earliest.
Accountants or other tax representatives will already be aware of MTD and will advise businesses how and when they need to make changes to be ready for the new service.
Those already using software will simply need to ensure it is MTD-compatible then sign up to the new service and authorise their software for MTD.
For those who are not using an accountant or don’t currently use software, it is quick and easy to sign up and there is lots of information available to help them prepare, including about what software is available.
The GOV.UK web pages provide information on a wide variety of products, from free software for businesses with more straightforward tax affairs, to increasingly sophisticated paid solutions. There are also products that can be used in conjunction with a spreadsheet for those businesses that don’t want to change their underlying record keeping system.
For easy-to-use guides and advice for businesses, agents, see guidance on GOV.UK: Making Tax Digital for VAT as a business: step-by-step.