Time is quickly running out ahead of the April 1 deadline when all VAT registered businesses, regardless of turnover, will have to submit quarterly VAT returns using Making Tax Digital (MTD) compliant software.
However, despite the deadline being just one month away, Yorkshire chartered accountancy and business advisory firm, Hentons, says there is still time for businesses that act now to meet the latest MTD requirements.
Robyn Jones is head of digital services at Hentons, which has been recognised as one of the top three large firms in the UK by leading cloud-based and MTD compliant software firm, Xero.
She said: “Since April 2019 businesses with a turnover above the £85,000 VAT threshold have had to use MTD compliant software to submit their quarterly VAT returns. However, VAT registered businesses with a turnover of less than £85,000 could continue using the Government Gateway for their returns, but this will come to an end from April 1, 2022.
“As a result, the thousands of businesses that voluntarily register for VAT, because it suits their individual circumstances, must act now. In January, HMRC revealed that only around a third of VAT registered businesses with taxable turnover below £85,000 had voluntarily signed up to MTD for VAT, meaning two thirds still had to act, and time is quickly running out.
“Businesses that fail to comply could be hit with financial penalties and investigations from HMRC, so they need to either sign up to MTD compliant software or enlist the help of an accountancy practice to guide them through the process.
“There are numerous software providers available and there is a search function on the gov.uk website, but Xero is our preferred option, which is straightforward to use and starts at £26 a month. Businesses must also sign up to MTD via the Government Gateway and will then have to use the software to keep digital records, mainly covering incoming and outgoing payments.”
Robyn added: “The good news is that signing up to MTD compliant software can be done relatively quickly and cost-effectively. Businesses that we guide through the process are always amazed at the time savings and business insights that cloud accounting offers. It also means there’s no longer a need for manual bookkeeping, excel spreadsheets and piles of paperwork.
“In addition to simplifying VAT returns, the software can also automate invoices and receipts, as well as a host of other internal bookkeeping functions, and ultimately it gives an invaluable quick and accurate picture of the real time finances of the business.”
By April 2024, HMRC aims to implement MTD for self-assessment for anyone with annual earnings of more than £10,000 and by 2026 it will become mandatory for corporation tax purposes.