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Businesses are being urged to get ready as over 2,000 businesses are signing up for Making Tax Digital for VAT each day.
Almost 1.2 million businesses have just one month to go before the introduction of Making Tax Digital – a new way of keeping business records and submitting digital VAT returns, the government revealed recently.
Nearly 30,000 businesses have already signed up to the new service which will give them a more integrated approach to business and tax.
MTD will reduce the time they spend on administration in the longer term and make it easier for them to get their tax right.
For VAT periods from 1 April 2019, most businesses above the VAT threshold will need to keep their records digitally and submit their VAT return using MTD-compatible software. HMRC has written to every business that will be mandated with information on what they should do and how.
"It has never been more important for businesses to be able to seize the opportunities that digital technology offers. Making Tax Digital helps them to do just that – making it easier for businesses to get their tax right first time by transforming how they keep their records and send information to HMRC," Mel Stride, financial secretary to the Treasury, said.
Ms Stride noted that it will give businesses more control over their finances, allowing them to spend time focusing on innovation, growth and the creation of jobs.
Theresa Middleton, director of the Making Tax Digital for Business Programme, explained that there are over 160 software products for businesses to choose from with a range of prices, including some that are free, offering different levels of functionality to suit every business.
"It’s time to get on board and join the thousands of businesses already experiencing the benefits of MTD," Ms Middleton said.
What do businesses need to do?
Accountants or other tax representative are already aware of MTD and will advise businesses how and when they need to make changes to be ready for the new service, the government said.
It advised that those already using software will simply need to ensure it’s MTD-compatible then sign up to the new service and authorise their software for MTD. Those who are not using an accountant or don’t currently use software will also need to sign up, but have a lot of information available on the government website to help them prepare.
With many wondering whether they are affected by MTD, the government explained that most businesses above the VAT threshold have to start keeping their records digitally and sending their VAT return to HMRC direct from their software for VAT periods starting on or after 1 April.
It advised that they should talk to their accountant or other agent about how they are making returns MTD-compliant. Software providers should also be consulted by businesses who already use software to ensure it will be compatible.
"Those businesses that are either not represented by an accountant and/or do not already use software will need to select software to use and sign up to MTD, then authorise their new software for MTD.
"Our GOV.UK webpages provide information on a wide variety of products, from free software for businesses with more straightforward tax affairs, to increasingly sophisticated paid solutions," the government explains.
There are also products that can be used in conjunction with a spreadsheet for those businesses that don’t want to change their underlying record keeping system.
HMRC recognises that businesses will require time to become familiar with the new requirements of MTD.
HMRC has been clear that during the first year of mandation, it will take a light touch approach to digital record keeping and filing penalties where businesses are doing their best to comply with the law.
But this does not mean a blanket ‘no penalties promise’.
No business will be forced to go digital for their VAT returns if they are unable to, the government said.
"Anyone who is already exempt from online filing of VAT will remain so under MTD, and there is further provision for those who cannot adapt to the new service due to age, disability, location or religion to apply for an exemption," it noted.
The government added that those businesses that are registered for VAT but are below the VAT threshold are also not required to use the MTD service, but can choose to do so.