Yet again, there are more changes coming for Making tax Digital (MTD).
MTD is becoming mandatory for all businesses from 1st April 2022, even those businesses with a VAT turnover below the registration threshold.
Now I must declare, that I’m not much of ‘Tax’ person, so I won’t be sharing any insights into the wonderful world of what’s coming with MTD, however as a business owner, like many others, I may well be forced to make a choice, so I thought I would share some insights.
The latest changes will include the withdrawal of certain reporting mechanisms for VAT submissions from your accounting software to HMRC (your old system won’t be able to talk to HMRC anymore), which has led to submission changes in your software to cope.
VAT Submissions for MTD are currently mandatory for all businesses that have crossed the VAT Registration threshold and therefore for those businesses, the decision has been made for them; they need to submit via an MTD method.
However, businesses that have voluntarily registered for VAT because they’re below the registration threshold and who haven’t yet signed up for MTD, now face the choice of whether to register early for MTD VAT Submissions or to remain unregistered and to file VAT Returns through the Government Gateway.
That doesn’t seem so bad, right?
However, there are some drawbacks to not embracing MTD.
Firstly, how are the numbers being prepared?
If you’re not using accountancy software yet, then tracking the entries manually, preparing the finished numbers and then entering them into the gateway leaves a lot of room for arithmetic or human error. This can be costly to notice, find and resolve.
Spreadsheets are super easy to break without noticing, so the likelihood of an error slipping in can be quite high, even for the most diligent person. If you’re busy and up against a deadline (which I’m sure most business owners find themselves in), then the process can be tiresome, stressful and therefore easy to make a mistake.
The level of effort to prepare that information can certainly creep up, especially if there are a couple of inconsistencies, and you suddenly lose a couple of hours trawling around spreadsheets and paperwork.
It is also quite difficult to proofread your own work, especially when you’ve just spent an hour or two digging around in the details.
Secondly, the inevitable is coming!
HMRC has some very strong reasons for introducing MTD, one of them being that it is easier to do accounts when the transactions are recent (which is the main argument for moving the self-assessment style reporting to quarterly). And we have to agree with them, trying to remember every transaction for over 12 months is difficult. The quicker a transaction is processed, the better.
As MTD is not going away. I would advise to future-proof your business. Getting MTD compliant now will save a lot of stress later.
If you are already using a software for your accounting, it is just plain easier and more time effective to connect it up and click a button for submission each month, compared to finding the report, reviewing it and then manually logging into your gateway to enter the same numbers. There is also a slight risk of getting the report periods wrong or transposing the entries as you fill in the form, by using your software that talks to HMRC, that is covered.
If you are not using software, then you may find that you gain more than just MTD filing from moving over to an accounts package.
Some benefits are:
Finally, with the introduction of the historical information, reports and VAT Submissions available at click of a button, you get the chance to prepare and submit filings a lot easier, avoiding the stressful deadlines but more importantly, giving you the opportunity to do some cash flow planning.
MTD for VAT is here now, and MTD for income tax is arriving in April 2023, with corporation tax to follow. Using up-to-date accounting systems will mean you or your accountant can get those numbers together quickly, which then gives you a good 8- 9 months to plan for the payment of any tax.
We believe in the ‘value added’ accounting software brings to a business owner, if you would like to find out more about migration or how to get more from your system, why not book in a Working Session with one of the team?
You can do that here: www.pyramissolutions.co.uk/appointments.html