For VAT periods commencing on or after 1st April 2022, ‘Making Tax Digital’ (MTD) will apply to all VAT registered businesses regardless of turnover.
MTD has already been ‘live’ for nearly two years. It started with businesses above the current £85,000 VAT turnover threshold in 2019, however, is now also targeting VAT registered businesses under the £85,000 threshold.
There are certain requirements for MTD for VAT. The main requirement is for businesses to maintain digital records using what HMRC refer to as ‘functional compatible software’. This means a software program that can connect to HMRCs’ systems. The functions must include the ability to keep and preserve records in a digital form, create a VAT return from those records and provide HMRC with the return digitally.
Cloud accounting software, such as Xero and QuickBooks, are amongst the packages that are compatible with HMRC’s online portal. Cloud software has been in use for years now and has many benefits. Multiple users can be set up, with varying security levels, ensuring that everyone can access real time information and bookkeeping records are kept efficiently. Accountants are able to collaborate with clients, quickly and easily, offering advice on up to date figures.
If you are currently keeping manual records we would advise that you start the conversion process to a digital system as soon as possible. We are happy to advise on the best MTD compliant software suitable for your business and can assist with both set up and training.
Links to other MTD resources
Every (free!) cloud has a silver lining...
Cloud accounting software is our biggest growth area at the moment. This is due to both the HMRC Making Tax Digital initiative which requires businesses to submit their VAT returns using software, and the huge commercial and automation benefits of cloud software, we are at present seeing numerous businesses make the leap onto software packages.
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