Making Tax Digital exempt

Are we exempt from all this MTD stuff?

Jan 03, 2019

You will have no doubt have heard about HMRC’s plan to make tax digital (mostly from us!). To be brief, Making Tax Digital (MTD) is the government’s plan to transform the tax system and move it online. It will affect most businesses. 

The primary aim is to make tax administration more effective, efficient, and easier for taxpayers. It will also improve management accounts, which with the right Adviser, will be advantageous to you and to the growth of your business.  

We’re VAT-registered, how will it affect us? 

From April 2019, if you are VAT registered and have turnover above the VAT threshold (£85,000), you will be required to submit quarterly VAT information digitally. If you’re VAT registered, or close to the threshold, and don’t currently use a digital accounting package (like Xero or an up to date version of Sage) to record your VAT information, then you need to start planning now. 

But before paying for an upgrade to your accounting software, talk to our cloud accounting team who are focused on finding the best solution for your individual business circumstances, not just advising you on the best software on the market. You can get in contact with them via our MTD page or email them at discovery@a4g-llp.co.uk

What if we’re not VAT registered? 

From April 2020, HMRC will widen the scope of MTD by including all businesses (limited companies, LLPs, partnerships, sole traders and landlords receiving more than £10,000 income annually). This willlikely include submitting a profit and loss report and balance sheet to HMRC quarterly, with the option to pay your tax as you go. 

I already use Xero, so I’m sorted right? 

Whilst we know spreadsheets are not a viable option because your reports need to submitted electronically to HMRC’s new gateway, it’s not as simple as just switching to a cloud-based accounting system, like Xero. You’re about 75% of the way there if you use Xero, but there are still more steps you need to take to become MTD compliant. 

The new MTD system is not just a new way of submitting the 9 VAT return boxes. HMRC will effectively be receiving summary totals of different types of transactions that make up your VAT return. If the report says £2,000 of VAT was claimed relating to transactions that were missed in a previous quarter, HMRC will know. If you have raised credit notes, they will know. They will be tracking this data quarterly, so if there’s any shift in these figures, the computer will flag it up and it may lead to some questions from HMRC. 

The summary figures are pretty much open to you already, they are included in the detailed VAT report that your software provides.  But, how often have you actually looked at the detailed VAT report?

What if I’m using Sage? 

If you’re using Sage 24 or older, you will need to upgrade to the latest version to be MTD compliant (which is expensive!) But before you pay out for an upgrade, it’s best you speak with our Cloud Team to consider if there’s a better accounting software package that’ll not only make you MTD compliant, but make running your business easier and more efficient, leaving you time to focus on what you do best.

So, what steps do I need to take now?

  1. Firstly, check if your software is compliant and consider which accounting package is right for you. Improve automation to save you time and money. For example, by using apps like receipt bank (our video below goes into more detail on this) 
  2. Understand your detailed VAT report to avoid enquiry 
  3. Improve your quarterly management accounts so you know your business better
  4. Talk to us. We do so much more than tax. We can run through and find a solution that fits your business, from which accounting package will work best for you and demoing this software, to helping you to automate processes so you can spend more time on growing your business. 

There are a lot of things to consider when making a plan of action for MTD compliance. We've put all the factors for consideration into a neat checklist, so that you can identify how at risk you are, and what you'll need to sort out. Contact us at discovery@a4g-llp.co.uk for this checklist or to book an MTD discovery session with our team.  

Now is the time to get compliant and get ahead of the game. Our Cloud Accounting Team are ready to help you get control of your business, before HMRC start poking around.



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Category: Xero

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Josh Curties BA (Hons) ACA

josh.curties@a4g-llp.co.uk | 01474 853 856


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