This site uses cookies to improve your browsing experience and analyse use of our website. By clicking ‘I accept’ you agree and consent to our use of cookies. You can find out more about our cookies here. Find out more

What Making Tax Digital means for you

How does Making Tax Digital affect me?

Depending on your current situation, there are a number of steps you need to take in readiness for Making Tax Digital: 

VAT registered businesses and organisations with turnover above the VAT threshold currently keeping manual or spreadsheet records.
Organisations in this situation have a number of options:

Option 1: Invest in a compatible accounting software package
HMRC have previously stated their intention to provide free software which will allow the upload of information, but there is no information available yet as to what this may look like or when it might be available.  We recommend therefore that you invest in compatible accounting software. 

As well as ensuring you’re compliant with the new legislation, there are significant advantages to using an online accounting package.  Once the initial set up is complete, you may find preparing your accounts much easier, and that you have far less paperwork to keep on top of. 

A variety of accounting software solutions are on the market for both sole traders and small businesses.  The most popular are Sage Business Cloud, Xero and QuickBooks Online.  Prices for these packages typically start at around £15 - £20 per month and the good news is that accounting software is tax deductible.  

Spreadsheets may be compliant for Making Tax Digital for VAT provided that “bridging software” is used to submit the VAT return digitally.  Software companies are currently in the process of developing solutions to allow spreadsheets to be used.  Find out more: Bridging software solutions.

If you decide to purchase accounting software, we recommend that you make the change at the beginning of your financial year as this makes the process of switching things over much simpler. Moore can help you understand which package is right for you, and we can help with installation and training too if needed.  

Option 2: Outsource your bookkeeping to a third party such as Moore who can keep your records and file your VAT returns on your behalf
We understand though that not everyone will feel comfortable using digital technology.  Moore offers a comprehensive VAT service and will ensure your VAT returns are submitted correctly and on time, and are fully compliant with all HMRC regulations, leaving you free to focus on running your business.  

We can also provide a full bookkeeping service including the preparation of management accounts, providing cash flow forecasts, and a full payroll bureau – saving you time and employment costs.

Option 3: Apply to HMRC for an exemption if applicable
HMRC have confirmed that exemptions that already apply to electronic VAT returns will be extended to cover digital record keeping requirements. Non-digital alternative channels will be provided for those considered digitally exempt. 

This includes: 
  • Anyone who cannot get online due to disability, age, remoteness of location or other reasons.
  • Anyone whose religious beliefs are incompatible with the use of electronic communications
You will need to contact HMRC directly to find out how to submit your return, for example paper filing, if you cannot submit online.

VAT registered businesses and organisations with turnover above the VAT threshold already using an accounting software package.
If you're already using accounting software, the good news is that you may already be fully or partially compliant.  However, older versions of some desktop software packages may not provide the functionality to directly submit your VAT return to HMRC, so you may need to upgrade your software package. (Sage 50 accounts users for example will need to upgrade to version 25). 

We recommend you check with your current software provider to ensure that the package you are using is compatible with Making Tax Digital for VAT (i.e. it provides the functionality for you to submit your VAT return directly to HMRC).

If you aren’t already doing so, it’s a good idea to start to submit your VAT return directly through your accounting software as soon as is practical.  It’s simpler and more efficient, and means you’ll be prepared for Making Tax Digital for VAT when the new legislation comes into effect in April 2019. 

VAT registered businesses and organisations with turnover below the VAT threshold
Businesses and organisations with turnover below the VAT threshold are exempt from the legislation, even if they are VAT registered. You can choose to voluntarily opt into Making Tax Digital but there is no requirement to do so.
Non-VAT registered businesses and organisations
The Making Tax Digital regulations do not currently apply to businesses and organisations who are not VAT registered.  However, HMRC have stated their intention to become a modern, digital service, and we anticipate that MTD will be expanded to include Income Tax and Corporation Tax returns in future (although not before 2020 at the earliest.)  Therefore, as part of your future planning, you should consider moving to an accounting software package if you are not using one already.