Clive Murphy Ltd.

Making Tax Digital

Coming Changes to the Tax System for Small Businesses

Making Tax Digital (MTD) for VAT will start from April 2019. From that date businesses with a turnover above the VAT threshold (currently £85,000pa will have to:

  • • keep their records digitally (at least for VAT purposes) and
  • • provide their VAT return information to HM Revenue & Customs through MTD compatible software

In other words businesses will need to use commercial software to record their business transactions, and file their quarterly VAT returns.

At the time of writing very little commercial software is available to do this. The government has stated that spreadsheets will be acceptable as long as they are combined with a suitable API (Application Programming Interface). Which just means that government approved software will need to be used to transfer the information from the spreadsheet directly to HMRC.

It is expected that suitable software is available over the coming months to enable this to be done. No free software will be provided by the government.

It is likely that a variety of cloud based bookkeeping systems will also be offered over the coming months. These will be suitable for some businesses, but they may prove expensive and overly complicated for many small businesses.

I would suggest waiting until more options are available. The government has said it will adopt a 'soft landing' approach for the first twelve months so there should be no immediate problem with penalties, and given the choice of software is likely to be a significant long term decision it makes sense to wait until the options are clearer.

Issues to consider will include:-

  • • Cost. If a cloud bookkeeping system is to be used, the level of complexity would probably demand a long term commitment so the risk of future price increases also needs to be considered.
  • • Continued access to the records. There is a legal requirement to retain VAT records for at least 6 years so if continued access to the information isn't available, there is a risk of becoming locked-in to a particular software system.
  • • Will your accountant be able to freely access the data.

For many small businesses I expect a spreadsheet + API approach will prove the simplest and cheapest option.

MTD for other taxes will not commence until 2020.

Further information about MTD can be found at:

Free initial consultation with no obligations. Evening appointments available.
To arrange an appointment, you can either email me or call (01752) 822975 between the hours of 9am - 5:30pm Monday to Friday.

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