HMRC Making Tax Digital (MTD) comes into effect from 6 April 2019 for VAT registered business only. If that’s you, then here’s my list of dos and don’ts you can start today to get yourself ready for the biggest shake up to the tax system ever.
Dos: Best Practices to Stay Making Tax Digital Compliant
Here’s the essentials you need to follow to stay on the right side of HMRC.
DO: Choose an HMRC Compliant Bookkeeping Software
There are numerous bookkeeping softwares on the market, but not all are Making Tax Digital Compliant.
DO: Work Out When You’re First Making Tax Digital VAT Return is Due
MTD officially begins from 1 April 2019 but the date you’ll need to start reporting under its rules depends on your VAT quarter end dates.
Here’s the official HMRC dates you’ll need to use to work out when you need to start:
- Quarters ending January: first MTD Return is due 07/19
- Quarters ending February: first MTD Return is due 08/19
- Quarters ending March: first MTD Return is due 06/19
- For monthly VAT Returns: first MTD Return is 04/19
Don’ts: Best Practices to Avoid HMRC Penalties
HMRC are intent on updating the tax system that avoids mistakes and late payment of taxes.
DON’T: IGNORE MAKING TAX DIGITAL
It’s estimated over 40% of small business owners don’t know about Making Tax Digital. But it is happening. And it is the biggest shake up to the tax system ever.
HMRC are introducing a new penalty system for business owners who fail to comply, so it is important to prepare yourself for the changes it brings.
DON’T: LEAVE YOUR FIRST MTD VAT RETURN UNTIL THE LAST MINUTE
Depending on how you do you bookkeeping, switching to a MTD compliant software may need some upfront time investment.
Under MTD you need to record all the transactions that make up your VAT Return figures line by line in your bookkeeping software. This includes:
- Tax Point
- Value of Supply
- Rate of VAT charged
Make sure you factor in sufficient time to change your bookkeeping, familiarise yourself with MTD and submit your VAT return in the new way.
When it comes to Making Tax Digital it is important to get prepared. Here are the three things you need to think about when it comes to Making Tax Digital:
- The date of your first MTD VAT Return;
- How you plan to Maintain Your Books Digitally;
- Planning your transition to Digital Record Keeping.