Posted: 6 June 2018
Making Tax Digital is getting closer. Are you ready? Is your Accountant ready?
The Making Tax Digital (MTD) for VAT deadline is drawing closer. It’s less than a year until UK businesses that are VAT registered and above the threshold will be required to keep their records digitally, and submit VAT returns to HMRC using MTD-compatible software.
Even so, there’s still plenty of confusion in the market around which online accounting software will be compliant with MTD for business (MTDfb). And what it’ll mean for businesses and their accountants. So Xero have tried to answer some of those frequently asked questions and make sure you’re kept fully up to speed with what Xero are up to.
OK, so MTD won’t be delayed any further?
A number of areas of MTD have been delayed until earliest April 2020. However, HMRC has confirmed that Making Tax Digital for business (MTDfb) will come into effect in April 2019 starting with MTD for VAT. From 1 April 2019, VAT registered businesses that are above the VAT threshold (currently £85k) will be required to keep their records digitally and submit VAT returns to HMRC using MTD-compatible software.
Other areas of MTD such as Income tax and Corporation tax have been put on hold until April 2020 at the earliest.
Alright then, tell me: Will I be able to submit MTD VAT returns using Xero?
Absolutely! Xero customers are already able to submit VAT returns using Xero now, and we’re building a whole new VAT return experience and workflow to support the changes that MTD introduces. The great news is, we’ve already built this new connection and we’re currently testing it with HMRC to ensure it works as expected. We’ll be participating in the closed beta that HMRC are running this summer, where our first customers will submit VAT returns for MTD.
Xero’s new MTD VAT will be available to customers with no upgrade fees and with as minimal impact as possible.
So is Xero approved to support VAT submissions to HMRC?
Yes. Xero is on the current VAT commercial software suppliers list. As it stands, there’s not actually a list of MTD VAT approved software suppliers. Later this year we’ll be on the MTD VAT suppliers list once everything has been completed, tested and proven out. HMRC will then decide when it’s appropriate to publicise that curated list of products that’ll be MTD-ready.
Since the most pressing legislation extends to those businesses above the VAT threshold, that’s our priority.
When can we have a go at Xero’s MTD VAT functionality?
HMRC has strict adoption timelines in place – for example, we understand that monthly VAT customers can’t join MTD until after June 2019. And HMRC also has other qualifications for adoption. HMRC will qualify who can join and when, so we’ll need to rely on them to tell us who qualifies for MTD VAT beta in Xero, as well as after April 2019.
We’ll be joining HMRC’s open beta once it’s available later in the year. But we’re not yet sure of HMRC’s qualifying criteria, so we’ll need to understand that before interested Xero partners or customers can participate in the trial.
What will be the difference between how I’m filing VAT returns with Xero now and the MTD method?
MTD VAT in Xero will be a different experience to the VAT experience in Xero today. The VAT return is the same, but for example, HMRC will provide the returns to software, rather than people choosing dates for a return themselves. We’ll also make sure you’ll be able to make any required adjustments to the return before submitting to HMRC. There are other changes and differences too, so we’ll make sure you’re fully up to speed as soon as we’re clear on the process from HMRC.
So what should we be doing now to make sure we’re ready?
If you’re already using Xero to submit VAT returns, you don’t need to do anything right now. All Xero subscriptions currently supporting the submission of a VAT return will be updated for MTD VAT returns.
What else should I be aware of?
MTD for VAT is due to commence for VAT periods starting on or after 1 April 2019. So all businesses will need to comply with the new process from this date onwards. This means that many businesses will need to make a decision about their accounting software soon to avoid facing the complication of changing part way through their accounting year.
For example, a business with a 30 June 2018 year-end will need to use MTD-compatible software from 1 July 2018 to allow for the MTD requirements that will be required from April 2019.
Are you ready for MTD? Is your Accountant talking to you about MTD? If not, why not?
DTA & Co. is a digital accountancy practice that fully embraces technology and is ready for MTD, please get it touch if you need some advice on MTD.
For more information on MTD please visit Xero's blog page https://www.xero.com/blog/