Everyone is talking about it, but do we really know everything about MTD. Here are some key points about what this new government plan is:
Purpose of MTD is to make it easier for individuals and businesses to get their tax right and keep on top of their annual tax returns.
From 1 April 2019, all VAT registered businesses with a taxable turnover above the VAT threshold (£85,000) must keep digital records and file their VAT Returns using software.
The software businesses use must be capable of keeping and maintaining records, preparing their VAT Returns and MTD-compatible so it can integrate with HMRC systems.
HMRC are working closely with software developers to bring new products to the market that are MTD-compliant (please read below for your software options).
MTD will not be mandated for other taxes until April 2020 earliest.
Who is exempt from MTD?
If your taxable turnover falls below the VAT threshold you will need to follow the MTD rules, unless you deregister from VAT or meet other criteria, such as:
Your business is run by a religious society whose beliefs are incompatible with the requirements of the regulations, i.e. religious beliefs that prevent them from using computers.
It is not reasonably practical for you to use digital tools to keep your business records and submit your returns due to age, disability, remoteness of location or for any other reason.
You are subject to an insolvency procedure.
You are voluntarily registered for VAT and are trading under the threshold.
If you are exempt from MTD but choose to follow the MTD rules, you must inform HMRC, in writing, before the start of the next VAT period you want to use the MTD service and the date your next VAT period begins.
What is our advice?
First and foremost, do not panic and do not rush into purchasing any additional software. Take your time and get the best advice that is right for your business in the long term. This is also a great opportunity for you to review your systems and find out if there is an alternative out there to help you through this phase.
What are your options?
Are you using Sage software?
Sage 50cloud Accounts - if you are using Sage 50cloud Accounts or looking to upgrade to this solution, the MTD module is included as part of your package, alongside support and upgrades, at no extra cost.
Sage 50 Accounts (perpetual licence*) - if you own the software outright, you can continue using the perpetual licence but MUST purchase the MTD module (£300 + VAT per annum) before the legislation comes into effect in April 2019.
* Please note that Sage are putting all of their focus on making Sage 50cloud Accounts the optimum Accounts package for the future. Not all the new features will necessarily be included in Sage 50 Accounts perpetual licence moving forwards, so our recommended solution is Sage 50cloud Accounts.
Do you work in a specific industry?
Whether it is Wholesale and Distribution, Manufacturing or Professional Services (where projects, time and billing are important), we provide MTD-compliant solutions from Exact, who were recently shortlisted for Enterprise Accounting/ERP Software of the Year Award 2018. Contact us today to find out more.
We are providing MTD training to help ensure you are equipped with all the information you need on how to remain HMRC compliant and what Sage accounting software options are available for you.