Sorting out your tax is unlikely to be the highlight of anyone’s week, and this is particularly true for businesses with all the demands on detail and logistics. Hence, Making Tax Digital (MTD) – a reforming initiative by HMRC to ease the process of making VAT returns for businesses.
Under MTD, VAT-registered businesses with a taxable turnover of £85,000 are required to keep digital records of their VAT and send their VAT returns to HMRC using MTD-compliant software – the full list of compatible software is available here. Businesses with a taxable turnover under the VAT threshold will also be able to sign up to MTD voluntarily.
But is your business ready for MTD? A research study taken by the Institute of Chartered Accountants in July 2018 highlighted that just over 40% of UK VAT-registered businesses had not heard of MTD despite it soon being mandatory. Furthermore, at the time of the study only 54% of VAT-registered businesses were using HMRC-compliant accounting software, suggesting that many businesses may still not be ready for MTD.
What are the implications for your agency?
Depending on the size of your agency, you might already be fully prepared for MTD. For those that are not, we recommend you head over to the HMRC website to find out:
1) Is your business required to sign up to MTD?
2) Do you have authorised accounting software in place?
MTD is ordinarily effective for all VAT periods starting on or after 1 April 2019. However, in a recent concession, HMRC has delayed the start date for MTD for certain ‘complex’ VAT groups and larger businesses required to make VAT payments on account (generally those businesses with net annual VAT liabilities exceeding £2.3 million) has recently been deferred until 1 October 2019. HMRC has more information on the full list of ‘complex businesses’ that the deferral will apply to here. Overall though, only around 3.5% of businesses required to sign up to MTD will be included in the deferral.
The Reapit perspective
So how can Reapit help you worry less about VAT and spend more time building your business? Jeff Wylie, Reapit Group CFO, commented: “While causing many businesses considerable heartache, MTD for VAT is going to add huge value to many companies with its opportunity to reduce paperwork, increase efficiency, standardise processes, reduce errors and enable better tracking and reporting. The initial pain will certainly be worth it in the longer term.”
Although Reapit is not required to facilitate VAT returns for our customers, our software does integrate with accounting systems such as Access, SAP, Sage and many more that will be compliant with the new Making Tax Digital initiative. With Reapit’s software it’s easy for agents to download a report and upload it to their management accounts, taking only minimal time away from core business functions.
So, while HMRC goes around Making Tax Digital, there’s no reason we need make it complicated. With all the information available to prepare your business for digital returns, you’ll be ready in no time.