How to be MTD compliant in one day
How to be MTD compliant in one day
There’s no denying it; despite over one million self-employed people who are affected by Making Tax Digital (MTD) yet to comply with new legislation, MTD is now in full force. If you find yourself in the dark on how to be MTD compliant, don’t panic – there’s still time to avoid any fines.
Here are 3 essential steps on “how to be MTD compliant” in one day:
1. Understand your MTD position
Does MTD apply to you? You’ll never find out if you just bury your head in the sand. Find out when you need to act if you fall into one of the categories below:
- VAT registered business with taxable turnover above the VAT threshold of £85,000 will need to become MTD compliant for VAT returns only.
- Businesses that have voluntarily registered for VAT but do not earn taxable profits of the VAT threshold do not need to take action yet but can voluntarily choose to become MTD compliant ahead of time.
- Some types of “complex businesses” have been allowed an extension. HMRC announced a deferral to the start date of 6 months. Our recommendation is that you begin your preparations as early as possible. Complex businesses are considered to be one of the following:
- Not-for-profit organisations which are not companies
- VAT divisions
- VAT groups (the deferral date only applies to the group registration and not group companies)
- Public sector entities such as Government departments and NHS Trusts
- Local authorities and public corporations
- Traders based overseas
- Those required to make payments on account
- Annual accounting scheme users
These complex businesses will be mandated to use MTD from 1st October 2019 and HMRC have issued individual letters with formal legal notification.
- Where you are a business that is nearing the VAT threshold of £85,000 you need to pay particular attention to your earnings as once you reach the threshold there is only a short amount of time before you have to become MTD compliant.
When MTD for VAT begins, the relevant periods to consider for businesses that file quarterly are:
2. Sign up for MTD
Once you’ve identified that you are required to be enrolled onto MTD you need to register on the HMRC website. You will need your Government Gateway user ID, password and VAT registration number. If you use an accountant to complete your VAT returns you can ask them to help you complete this step.
3. Get onto MTD-compatible software
MTD requires relevant businesses to complete their VAT returns using approved software which will also involve keeping your VAT records digitally. Find more information and guidance in our article ‘What is cloud accounting?’ or alternatively take advantage of our Xero partnership which allows us to provide discounted rates of Xero subscriptions.
The VAT return deadline dates have not changed so your existing VAT return period will apply.[table id=4 /]
That VAT information you are required to supply has not changed so continue to keep the same kind of records as you have done before:
- The value of all sales you have made, excluding VAT
- Details of all your purchases (exc. VAT)
- The rate of VAT charged on each sale and purchase
- The date of all transactions
- The name and principal address of your business
- Your VAT registration number
- Details of any VAT accounting schemes you use
The VAT return itself is also the same and will contain the same nine boxes, but it will also allow for additional information to be submitted on a voluntary basis if necessary.
How to be MTD compliant may at first seem daunting, but the reality is that, by taking clear steps forward now, the solution is relatively straightforward. Where you would prefer not to be involved with MTD yourself, Ridgefield Consulting can offer a full bookkeeping and VAT return service in order to ensure your business complies. If you have any queries or require further information please get in touch.
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