Currently, VAT registered businesses with a taxable turnover of more than £85,000 must follow the rules for ‘Making Tax Digital for VAT’ (MTD) by keeping some records digitally. If that’s you, hopefully you’re already doing it.
But what about businesses with sales below the £85,000 threshold? At the moment they can register for MTD voluntarily but from 1 April 2022, it will be compulsory for ALL VAT-registered businesses, irrespective of size.
That means that a lot of small businesses who do their bookkeeping on paper or spreadsheet are going to have to computerise their VAT records by April 2022. The easiest solution is to use cloud accounting software such as Xero. Spreadsheets will still be allowed, provided you use third-party bridging software to file the VAT Return.
- From 1 April 2022 you will no longer be able to log into the Government Gateway and fill in the VAT Return boxes on the HMRC website. The only way to file a VAT return after that date will be through some sort of approved software.
Whatever route you take, our bookkeeping team can help you set up a new VAT accounting system to comply with MTD. If you prefer, they can take on the whole bookkeeping and file your VAT Returns for you. Just contact Arabella Browne or Zoe Powell on 01749 342255 to discuss your options.
Why use cloud accounting software?
Software is all very well, but it’s going to cost you £12-25 per month, and you’ll need to learn how to use it. Is it worth it? Our view is most definitely YES! With cloud software such as Xero the benefits include:
- A direct link with your bank, so bank statements are imported automatically into the software every 24 hours – you don’t need to key them in, and you won’t miss or lose any bank statements along the way;
- You can invoice your customers direct from the software, even from your smartphone, and take credit card payments on the spot – this is a huge time and money-saver for tradespeople, and totally eliminates bad debts and chasing slow payers;
- Receipt capture: take a photo of receipts and invoices on your phone and they will go straight into your accounts – no need to keep the paper copies;
- VAT returns can be filed from the software, so there’s no extra work to do at the end of the quarter – especially useful if you get VAT refunds as they can easily be claimed as soon as your VAT period ends;
- Since your accounts are always up to date, you can see a profit and loss account any time, and estimate ; and
- Year end accounts and tax returns can be produced far more quickly since your accounts will be ready as the press of a button.
Contact one of our bookkeepers if you’d like to learn more about Xero and how it can help you comply with MTD AND make your bookkeeping quicker and easier.