Any UK VAT registered business with a turnover exceeding £85,000 will have to keep digital records and submit their VAT returns directly from their accounting records to HMRC using compatible software. HMRC call this change Making Tax Digital (MTD).
The introduction of MTD is a great time for your business to take advantage of the massive improvements that have taken place in accounting software technology in recent years.
Do you need to change?
Yes, if you currently use a spreadsheet or manual books, you will need to change to using a compatible software package.
Yes, if you use Sage Line 50, you will need to upgrade your desktop to Sage 50C (or higher).
No, if you are currently using one of HMRC’s approved cloud based software providers such as Xero, Quickbooks Online or Sage One the only change you will need to make is to submit directly through the software rather than through the HMRC website.
Our recommendation to you
We have researched the MTD products extensively and we think that the best accounting software available for businesses with less than 1000 sales invoices or 1000 purchase invoices per month is Xero.
In addition to being compatible with HMRC it has many other enhancements to traditional accounting software so that we can work more efficiently with your business. You can give us a login to your accounting data allowing us to look at your financial information at the same time as you, and in real time, from our office. It also means that we won’t need to request back-ups of your data to upload on to our system to prepare your year-end accounts. You can also leave messages for us to look at your data and help you with queries, for example, how to correctly code a journal or transaction you’re unsure about. Xero also connects with lots of Apps which means you can input and manipulate your financial information from your phone or tablet.