Businesses not ready for Making Tax Digital VAT deadline

Nearly two thirds of businesses (64%) say that Making Tax Digital is a good idea but that they need more support with their plans ahead of the deadline of 1 April for mandatory digital VAT reporting, and only 12% are confident of their approach, according to research from KPMG

The firm’s poll of 1,000 businesses asked which statement best described their attitude to Making Tax Digital and the 2019 deadline to comply with the new VAT legislation requiring all businesses registered to pay VAT over the threshold of £85,000 to digitally report transactional quarterly reports.

While nearly two thirds (64%) of respondents thought it was a good idea but wanted more support, one in five (19%) could see no advantages of changing the current VAT reporting system, while 5% said it would be damaging to their business.

Just 12% were supportive and ready for the 1 April deadline, literally days after Brexit day on 29 March.

From that date, most VAT-registered businesses above the threshold of £85,000 will have to keep digital records and submit VAT returns using compatible software.  A small percentage of businesses with more complex needs are deferred to 1 October. After a soft-landing period of a year, a further requirement for digital links throughout the VAT return process, or a digital audit trail, will be required until the full implementation deadline of 31 March 2020.

Chris Downing, tax partner at KPMG said: ‘With just over a month to go until the deadline, it’s worrying to see that almost two thirds of businesses say that they need more support and are still in the process of working out what they need to do. This could potentially be both costly and time-consuming, depending on the changes that need to be made.

‘Although 98% of VAT registered businesses already file VAT returns electronically, Making Tax Digital will involve significant changes to their existing processes. For example, keeping digital records, maintaining a digital audit trail of all business transactions, and implementing new software to submit their VAT returns digitally.’

Downing cautioned that businesses also need to think about the flexibility of their systems and processes to meet potential future requirements.

‘HMRC are seeking to become the most digitally advanced tax administration in the world. We are likely to see provisions for income tax and corporation tax further down the line,’ he said.

Source: Accountancy Daily - Report by Pat Sweet.

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Digital Records Will Be Compulsory!

The government intends to force all businesses, large & small, to keep records electronically. When will this happen & how should you prepare for it?

Making Tax Digital

It would be easy to read the government’s manifesto about the future of tax administration “Making Tax Digital” as merely a vague policy document. While it’s just an outline it spells out changes that will have serious consequences for many businesses.

Who Will It Affect?

Unincorporated businesses with income of £10,000 per year or more, which don’t currently use software to keep financial records, will be required to do so. It seems that companies will have to use digital record keeping no matter what the level of their income. The new regime will include landlords who receive rents etc. of more than £10,000 per year.

Which Software?

The good news, if you can call it that, is that the government will provide free apps to help businesses. However, reading between the lines these won’t be sufficiently comprehensive for some businesses & therefore you may have to purchase commercial software. This can be relatively cheap, less than £100 per year for a small business, but using software isn’t as simple as keeping manual records. Most require a working knowledge of double-entry accounting, which may mean having to pay a bookkeeper instead of doing it yourself.

When Will It Happen?

Although the deadline given is “by 2020” the document also says that some businesses will need to comply with digital record keeping by April 2018. It doesn’t give any clues as to which businesses the earlier date applies to.

Conclusion:

If you keep records manually, we recommend that you start planning for the change now. Look for suitable software & someone who knows, or can learn, how to use it. If you wait for the government’s free apps it might be too late to get to grips with them in time.

For more information on the Bookkeeping & IT services we provide, please visit our Bookkeeping & VAT services page here.

If you require more detailed information on these proposed changes & the potential impact it could have on both you & your business, then please contact us & we’ll be happy to help… Our client’s vouch for our service & we invite you to look at reviews from some of our customers on our website here, together with our featured page on ‘The Best of Thetford’ website.

Please note that Emerald Accountants Limited shall not be liable for any loss or damage arising out of the use of any of the information disclosed in this article…