In March, HMRC announced that due to Coronavirus the second phase of Making Tax Digital for VAT (MTDfV) was to be postponed by a year to 1 April 2021. This means that businesses have until their first VAT return period after 1 April 2021 to put their digital links in place.
Good news for some? Well yes, but in truth your digital software should have been registered before this announcement was made!
MTDfV has been in the pipeline for a number of years. It’s the way that HMRC requires businesses to file records digitally and submit VAT returns via compatible digital software. It applies to almost all UK VAT registered businesses with an annual turnover of £85,000+, including charities and overseas-based businesses.
Before you can submit your returns, you have to register for the MTDfV system. Once registered, you can no longer submit VAT returns the ‘old’ way. Check out our blog for the backdrop to the story and who is affected.
Unfortunately, the spreadsheet method of accounting is no longer acceptable but there is specialist bridging software available that can work as a temporary fix. However, bridging software doesn’t fulfil all the MTDfV requirements like digital record keeping and maintaining the digital links with HMRC and your spreadsheet data may need adapting to work with the software.
HMRC states that there are digital accountancy solutions available at no or low cost for most businesses and most businesses will be able to claim any costs for hardware and software against their tax. There are free accounting software services from Wave, QuickFile and adminsoft which may be worth a look for starters.
If you’re ready to take the plunge into going digital with your accounts, consider an approved software package such as Sage, Xero, Iris, FreeAgent, QuickBooks or KashFlow which can start from as little as £5 per month (although this usually rises after an introductory period).
These platforms have been tested to be compatible with the MTDfV system. CRM has years of experience with accountancy software and can advise on the benefits and downfalls of each – which level is appropriate for your business and how to make the most of the features.
Not only is digital accountancy software a worthwhile investment in preparation for MTDfV, but when implemented correctly, it gives your business more control over its documents, better data security and instant backups, not to mention the reduced environmental impact that you’ll be making.
If you need any advice about your digital accounting software or Making Tax Digital for VAT, CRM would love to hear from you on 01865 379272.