The way businesses are expected to keep their business records is set to change forever.
From 1st April 2019 all VAT registered businesses whose taxable supplies are above the VAT threshold (currently £85,000) will have to maintain digital business records which are capable of filing VAT returns directly to HMRC. These digital records in their standard form must record every individual supply (sale) made by the business.
So, what does this mean for your business?
If you currently maintain your own financial records, including manual records, spreadsheets or non-MTD compliant book-keeping packages, you will need to change them to an MTD compliant software package which can link directly to HMRC to download your VAT return. The current Government Gateway will not be available to file your VAT return through. Therefore, from the first day of your VAT accounting period, which starts on or after 1st April 2019, you must be MTD ready. If you are concerned about your records and need help, please contact us.
If your records are maintained by us then you can relax, we have this covered! We are currently investing in both new hardware and software to facilitate a smooth transition so that you meet your obligations under MTD and take away the pain.
To avoid the need for your digital business records to record every individual sale i.e. every pint of beer, glass of wine, serving of steak & ale pie etc, we will maintain your records using the appropriate VAT Retail Scheme. This scheme enables us to record sales in your digital business records at the gross daily takings level rather than on an individual sale basis.
Whilst this will substantially reduce the number of transactions recorded in your digital business records, it still represents an increase in the amount of information we will be obliged to process on your behalf. We will now have to record the sales from each day in your financial records rather than simply one weekly total from your cash sheet. Fully completed cash sheets will become an even more important part of minimising processing time and therefore bookkeeping costs.
So, whilst the changes of the introduction of MTD are significant, the only impact you are likely to face will be a small increase in charges to cover the increased processing time.
And the future?
MTD for VAT is only the first stage in HMRC’s plan to make the tax system digital. The second stage will be known as MTD For Business which will represent a fundamental shift in the way that both individuals and companies report their taxable earnings. As things currently stand, this is scheduled for introduction in April 2020 and will involve the quarterly declaration of business profits via your digital financial records – now there’s something to look forward to!
As might be expected MTD will inevitably mean More To Do.