Making Tax Digital for VAT – 5 steps your business should take now
In our previous article, we talked about the new Making Tax Digital (MTD) rules and what they mean for VAT. Here are five practical ways to get your business ready for MTD compliance.
Step 1: Check whether MTD applies to you
MTD for VAT applies to companies and sole traders with a turnover above the VAT threshold of £85k. If your business is over this threshold, then the way you file your VAT returns will change. You’re no longer able to file your return via the HMRC website – you’ll have to file via approved, third-party software instead. Which brings us to…
Step 2: Get your software sorted
If MTD applies to you, you’re now legally required to keep digital accounting records and file your VAT returns using HMRC-approved software like QuickBooks, Xero or Sage. (If you prefer to keep it old-school with spreadsheets, then Clear Books Micro is ideal.) The government has a handy tool to help you find compatible software – and the team at Jupp Castle will happily talk you through the various options.
If you’re already filing your returns via an approved accounting package, you should be able to carry on as normal – but check with your software provider whether you need to upgrade to the latest version.
Step 3: Set up your new HMRC login
Once you’ve got the right software, you must sign up for the new MTD for VAT system. If you try to file a return through your old method, it won’t reach HMRC, so this step is absolutely vital. You can sign up here or ask your accountant to set you up.
Don’t be tempted to leave this to the last minute. HMRC recommends signing up at least seven working days before your return is due if you pay by direct debit, or 72 hours if you don’t pay by direct debit.
Step 4: Authorise your software
Before you file your first VAT return, you’ll need to authorise your software. Your accountant will be able to help with this, or you can ask your software provider for advice.
Step 5: Stay compliant
Keeping up with changing tax rules isn’t easy when you’ve got a business to run. Once you’re all set up for the new MTD for VAT process, working with an accountant or bookkeeper is the safest way to make sure your business stays on the right side of the law.
At Jupp Castle, we’re on hand to guide you through every aspect of MTD, starting with these five steps. Get the help you need.