By now you’ve probably come across the term Making Tax Digital (or MTD for short) and you might have a rough idea of HMRC’s plans. But do you know how your limited company will be impacted?
Making Tax Digital for VAT will mark the end of paper-record keeping for millions of limited companies. To sum it up, if you’re not already, MTD will see VAT registered contractors keeping their books up to date on at least a quarterly basis through approved software that integrates with HMRC. If you’re a contractor with a VAT-registered company and do not currently use a digital accounting package (such as inniAccounts) to record your VAT information – then you need to take action before 1st April 2019.
How will MTD affect me?
If you’re a tech-savvy contractor already using reputable MTD-ready software to manage your accounts, the answer is very little. Our software will seamlessly integrate with any new technology introduced by HMRC, while providing you with a live view of your tax position – as always. You can read more about how our software and team of experts are ready for MTD here.
If you’re using spreadsheets or clunky customer portals, you will need to start recording and filing your VAT returns using functional and compatible software. This software will need to record and preserve digital records and provide HMRC information using the API platform. You can find a list of all approved software providers here. If your selected supplier is not listed, we’d advise you to contact them about their intentions or to choose a new supplier.
What if I’m not registered for VAT or I’m voluntarily registered but below the threshold?
If your limited company isn’t registered for VAT, then this change will not affect you. If you are registered voluntarily but your taxable turnover has never been above the threshold for VAT (currently £85,000), then you are exempt from this change. However, you can voluntarily sign up to MTD at any time, which we highly recommend if only so you can benefit from a more accurate picture of your tax liabilities throughout the year.
It’s worth noting that HMRC has rolled out MTD for VAT to test the system and iron out any bugs. The clear intention is to then introduce mandatory digital record-keeping and reporting for other taxes. HMRC are hoping this could start as early as 2020.
For contractors working through their own limited company, now is the time to be clueing up on MTD. It makes sense to start using approved accounting software sooner rather than later, not only to ensure you’re compliant for future MTD roll-outs but to benefit from the host of advantages cloud accounting can offer.
Still unsure how MTD could impact your limited company?
Drop us a call and see how we can help.
Will MTD just make more work and admin for me?
A lot of people are worried that Making Tax Digital will just add complexity and take up more time. Far from introducing more paperwork, we think these changes are a welcome modernisation of the UK tax system. Many contractors already report VAT quarterly and pay it shortly after filing. We’ve seen first hand that a streamlined, little and often process is far better to laboured annual returns. It allows contractors a more accurate view of their tax liabilities, it reduces mistakes and penalties, limits reliance on paperwork and frees up time.
‘If you embrace digital, and find one of the many excellent smartphone-based solutions, you can do everything in real time. You can take payment for a workshop you delivered at a client’s office and have no paperwork to deal with. No more keeping one day a month aside for paperwork. Or, staring at spreadsheets after a long week in the office!’Paul Nicklin, Technology Director at inniAccounts
Going digital needn’t be a pain. Software specifically tailored for contractors, can help to reduce admin tasks, provides the ability to check records more frequently and allows a greater ability to plan for business growth. The truly great thing about cloud accounting systems is that they provide complete transparency to the contractor. Forgotten bills are a thing of the past, as you can see your tax liabilities and available cash at a glance 24/7; without time-consuming tax calculators or spreadsheets.
Time to go digital
Whether you’re an existing client, looking for a hassle-free switch or simply want to brush up your knowledge – we’re here to make Making Tax Digital simple and provide you peace of mind. Preparing for digital tax starts with managing business accounts online. If you’re already using
Learn how inniAccounts can help you with Making Tax Digital today.