01 Apr Is your startup or small business ready for digital VAT returns?
Any existing VAT-registered business or UK startup planning to register for VAT needs to be fully aware of the new Making Tax Digital requirements and what this means for their business.
1 April 2019 was the deadline for digital VAT returns compliance. Although HMRC has indicated it will take a fairly lenient approach for a while, this will not always be the case.
What do the digital VAT return requirements mean for my business?
A lot of small businesses are unprepared for the 1 April digital VAT deadline and will be unable to store, process and file VAT returns in digital format. 81% of current VAT-registered businesses are aware of the Making Tax Digital deadline or its concept; however, only 7% of businesses had already signed up for the service at the start of March 2019. Instead, many business owners were placing all emphasis on their accountants to advise them about any essential requirements of the service.
Adrian Rudd is the Chairman of the Joint Chartered Institute of Taxation (CIOT)/Association of Taxation Technicians (ATT) Digitalisation and Agent Strategy Working Group, and he said: “It is good that progress is being made on awareness of MTD, though one in five affected businesses remain completely unaware of it and many of those that are aware are hazy on the details. There is a lot more work needed over the coming months.”
How do I comply?
Compliance with the Making Tax Digital requirements for VAT means making a switch to maintaining digital records and submitting these via the HMRC portal on a regular basis.
HMRC studies have shown that about 50% of registered businesses intend to sign up to digital returns by the April 2019 deadline. However, it is important that any business is digitally prepared for this switch prior to signing up as it could cause accounting problems otherwise.
Anybody who currently retains paper records of all receipts and invoices and makes manual VAT returns will find the switch over to digital record keeping has a steep learning curve. Approved accounting software is an essential requirement, too. Although businesses currently using software packages for accounts may be able to make the switch by adding bridging software to their package.
SQK Accountancy provides professional and affordable accounting services to startups and existing small businesses in the UK. Get in touch to discover all the ways we can help you handle the switch to digital VAT returns.