The small business owners seem to be stressed about the implementation of MTD.
They are either worried about getting used to the new system or they are worried about the additional costs that their business has to bear in the process of implementing MTD.
There is a solution to both of these problems and you will find the transition to MTD a step towards efficient accounting. You will feel more confident making business decisions. After the implementation of MTD the company`s tax position will stay clear throughout the year, without having to wait for the end of the year to know your tax bill which will help in making more informed decisions.
We have prepared ourselves and also our clients for MTD and now most of our clients are ready to make MTD a success.
Since we are dealing mostly with small businesses we segmented our client’s base by those above the VAT threshold. Next step was to make sure that they are using the right software to keep their records digital.
There is a list of software available on HMRC website which are compatible with MTD. It includes 10 minute account and Xero as well.
We at Taxacollega have successfully tried the MTD version of Xero and we tell our clients that it’s always worth familiarising with the new software before it gets compulsory. Vat registered businesses above the threshold of £85,000 should get them familiarised with the software that is compatible with the MTD for VAT. HMRC lists Xero as one of the software that is compatible with the MTD.
HMRC has strict adoption timelines in place - for example, 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.
When talking to one of our clients who run a small café, and uses flat rate scheme were concerned if they have to make some drastic changes in the way they used to do their accounting and also the way they handled their VAT. However, HMRC is very clear and has explained the fact that is not making any changes to the VAT scheme. HMRC is not making changes to VAT schemes as part of MTD. Businesses like this will be eligible to continue the scheme the same way. Businesses that qualify for MTD using these schemes will be required to comply with MTD digital record-keeping requirements and provide VAT returns using MTD compatible software HMRC.
HMRC has explained that the scheme users within MTD will not need to keep a digital record of:
- purchases unless they are capital expenditure goods on which input tax can be claimed
- The relevant goods used to determine if they need to apply the limited cost business rate.’
Another client who currently uses simple spreadsheet to record her income and expenditure. He uses this method since a long time and being in his 60`s he is reluctant to implement any changes in the book keeping. He was VAT registered because his income exceeded the threshold, however even if his income was below £85,000 in some quarters he would stay registered as his clients could claim input tax. He was considering withdrawing from the VAT registration to avoid the hassle of MTD. Unfortunately that is not the option anymore. After April 29 a VAT-registered business goes over the £85,000 it must join MTD and cannot withdraw if turnover subsequently falls below the threshold.
Even after looking at many such situations HMRC stays confident that the implementation of MTD will result in more timely and accurate record-keeping and will help prevent errors that can happen when businesses are doing manual calculations or transcribing information from one format into another. We also believe that MTD once implanted will make life easier.
If you have any queries feel free to contact accountants at Taxaccolega 020 8127 0728. We will be very happy to help with your concerns.