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The first phase of HMRC's Making Tax Digital (MTD) initiative is a matter of weeks away. If you need to make a VAT return after April 1 this year, it's time to make sure you have the right software.
As detailed in our earlier MTD blog, from April 1, VAT-registered businesses with a taxable turnover above the VAT threshold (currently £85,000) will have to submit quarterly VAT returns using software compatible with HMRC's Application Programming Interface (API) platform. HMRC will no longer accept figures entered manually into the HMRC portal.
Presently, it's not compulsory for VAT-registered businesses below the threshold to submit their returns digitally, but they can use the new system on a voluntary basis. It's likely that income tax and corporation tax returns will be brought under the new rules by 2020.
MTD is the first stage of the Government's plan to modernise the tax system and make it easier for businesses and individuals to manage their affairs with greater efficiency. Ultimately, MTD will spell the end of tax returns for millions across the UK - businesses will file a quarterly summary of income and expenditure followed by an end of year statement.
If you're already using accounting software, make sure you check with your supplier that it's compatible with MTD. HMRC is working with software suppliers to provide software compatible with MTD requirements. Details are being updated regularly and can be viewed here.
There are some exceptions to the MTD ruling. You can apply for exemption if it isn't reasonably practical to keep digital records due to age, disability or remoteness of location. Practising members of a religious society whose beliefs prevent them from using computers can also apply for exemption.
To discover how AMR can help your business comply with the new rules, please get in touch. Our bookkeeping and payroll experts will be happy to answer your questions.