04 Apr Don’t let Brexit distract you from MTD
Two of the hottest hot button topics for accountants in recent times have been Brexit and Making Tax Digital (MTD). Both have resulted in plenty of questions – and not a lot of answers.
We’ve been asked quite often by our clients about the impact of Brexit on taxes – especially VAT. The truth is, we don’t have a clear answer. No-one does!
Meanwhile, Making Tax Digital has been bubbling along in the background for what seems like an eternity. Many felt it would be postponed thanks to the uncertainty of Brexit, but HMRC has forged ahead, and on April 1, it became a reality.
VAT-registered businesses with a taxable turnover of £85,000 now need to comply with Making Tax Digital for VAT. This involves keeping digital records and submitting VAT returns via MTD-compatible software.
What does MTD mean for you?
MTD is the clearest indication yet that manual accounting and paper returns will be phased out by HMRC as part of their ambition to “become one of the most digitally advanced tax administrations in the world.”
All VAT-registered businesses will have to switch to a compatible cloud software system, unless they have valid reasons for being exempt.
The same exemptions prior to Making Tax Digital apply, and include not having access to a computer and the internet, or for religious reasons.
Some businesses have a deferred MTD start date of October 2019 and examples include Trusts, VAT groups, and annual accounting scheme users. You should only assume you have a deferral if you received a letter from HMRC confirming that to be the case. Otherwise you should comply with Making Tax Digital from the start.
And if your VAT quarter begins after April 1, you should make a note of when your next return is due.
Here are some examples:
- VAT Quarter ending 31 March 2019: First VAT quarter under MTD will start on 1 April 2019 and due on 7 August 2019.
- VAT Quarter ending 30 April 2019: First VAT quarter under MTD will start on 1 May 2019 and due on 7 September 2019.
- VAT Quarter ending 31 May 2019: First VAT quarter under MTD will start on 1 June 2019 and due on 7 October 2019.
Note: All of our VAT-registered clients are affected from 1 April 2019.
It pays to be prepared
Most accountancy firms have been preparing for MTD for quite some time, and Barnes & Scott is no different. We’ve been advocates of Xero from day one, and that means all of our clients are up and running on this industry leading, MTD-compatible software.
Prior to Making Tax Digital going live, we took some time to familiarise ourselves with the new Xero features and set up the relevant accounts with HMRC. Now that we’re up to speed, we’ll make sure you are too.
Of course, we’re also available for any questions that you may have and will ensure a smooth transition through this significant change. Contact us today.