The taxman is changing the rules once again, this time forcing businesses to file VAT returns through a digital accounting system in a bid to recoup around £9 billion that goes uncollected each year. It is certainly not hard to see where the Government’s motivation for change is coming from.
It means - for those of you that still do - you can no longer can put together your return using Excel spreadsheets and bits of paper. But if you are thinking you should sign up to the new regime as soon as possible, you might want to cool your jets. Putting your name on the dotted line for ‘Making Tax Digital’ too soon might cause you more problems than it solves.
All VAT-registered businesses with more than the requisite £85,000 in earnings will need to keep electronic records of receipts, income and expenditure from April 1. So, if you have not started doing this yet, then you need to track back a few weeks to catch up. All returns will need to be filed with the relevant information online, which for some companies will be a major change in methods. For most and certainly those with higher earnings, it is an unavoidable change.
However, when it makes sense to sign up to the new regime will largely depend on how you deal with your accounts currently, and when your next VAT accounting period ends. Let’s say it finished on March 31, 2019. In that case, all records from April 1 need to be kept in a digital format. So, your first ‘Making Tax Digital’ return date would be, at the latest, August 7.
Remember though that the final deadline for the VAT period ending March 31 is May 7, and if you register for MTD before you have made this final payment, you could lose access to your Government Gateway account, and lose the chance to file your final return without MTD. This would be a major problem if your accounts are not all held digitally. Accountancy software experts Sage estimate around one in eight businesses still file VAT manually.
There is an even more defined window to register though if you pay your VAT by direct debit. You cannot register for MTD within five days of your last non-MTD return, but you must register at least seven days before your next one. Banking rules are the culprit – they impact on the registration timing.
There are likely to be some teething troubles for companies, but you can’t ignore the fact you may have to keep your records differently.
If you have not yet thought about registering for the MTD regime, this is not a time to sit on your hands. The legislation is here to stay, so find out whether you need to register, and when it makes most sense to start the process.