MTD Phase 2: Are you ready for the next phase of Making Tax Digital?

Looking ahead to the full implementation of Making Tax Digital (MTD) you might think there is loads of time to get converted to digital but in reality, the best time to act is now.

For many, the move to digital will be a major behavioural change as you will be required to shift to quarterly reporting, which is why we advise acting early to get your affairs in order.

The MTD Roadmap

VAT-registered businesses with a turnover greater than the VAT registration threshold (£85,000) have had to keep digital records and send VAT return information to HMRC using MTD-compatible apps and software since April 1, 2019.

For businesses below the threshold, the present plan is as follows:

• 2022: From April 1, 2022, all VAT-registered firms, including those below the threshold, will be required to file their VAT Returns using MTD-compatible software.
• 2024: Unincorporated entities and landlords with an annual turnover of more than £10,000 will be subject to MTD for Income Tax beginning in April 2024.

How to manage the transition

In order to be prepared for the switch we advise following the steps below:

1. Choose the right Cloud Accounting Software for your business needs

Whilst this can be a daunting task with things such as price, security and usability all needing to be considered, you do not need to worry as we are on hand to support you with this decision.

A suitable cloud-accounting solution will:

• Collect and prepare your VAT returns for you
• Ask you to check each VAT return before confirming, and submitting to HMRC.
• Allow you to attach scanned invoices and receipts directly to the software saving you archiving physical information.

2. Ensure you understand the digital integration

Whilst we are here to support you with the changes and answer any questions you might have, it is important that you understand the process and how you will need to adapt in order to be compliant.

Some useful sources of information:

• Making Tax Digital for Business – stakeholder communications pack – GOV.UK
• Help and support for Making Tax Digital – GOV.UK
• VAT Notice 700/22: Making Tax Digital for VAT – GOV.UK
• Apply for an exemption from Making Tax Digital for VAT – GOV.UK

3. Sign up for MTD

Before signing up for MTD, you can choose and deploy an appropriate cloud-accounting software application, once you have:

• Acknowledged the key changes that will take effect;
• Verified that you are MTD compliant;
• Completely processed all of your purchase and sales data;
• Have you conducted your own research and/or consulted with a trustworthy advisor.

If you pay by Direct Debit, avoid signing up fewer than 5-7 days before/after your next VAT return due date, and no less than 3 days before/after your VAT return due date if you pay by another way.

We would advise signing up as soon as you are ready to avoid any complications. If you sign up too close to your next tax return due date, you might have to pay twice!

Sign up here

If you need support in signing up for MTD please contact one of our specialists.