The final countdown to Making Tax Digital for VAT (part 2) – your questions answered

There are only a few days to go until the final Making Tax Digital for VAT deadline. So we’ve been asking some of our accounting partners to answer any last minute questions you’ve got.

In our second post, we hear from Cheryl Sharp of Pink Pig Financials. She gives us the low-down on the fines you could face if you don’t get ready and the software that can help. 

How much will the fine be if you don’t comply?

They’ll be up to £500 per business.

HMRC has said it will take a “light touch” when it comes to fining late submissions. This means you won’t get fined straight away. Brexit has also been a significant factor, so it might take another few months until they become real. 

That doesn’t mean you should just sit back and do nothing. There is no escaping them, whenever they might come.

HMRC isn’t going to be hard on businesses trying their best to comply in the early stages. But, if you miss a payment deadline you will enter a 12 month period. During this time you might have to pay a surcharge on top of your VAT bill.

What sort of software should I use so that I can submit tax digitally?

Cloud software is your most effective solution. You don’t necessarily need to be on it. But, it will cause you much less hassle down the line if you are. It’s also highly likely that HMRC will add additional requirements further down the line that require sophisticated software. 

If you use a cloud-based system, you’ll save yourself the trouble of constantly updating your software and you won’t have to deal with bugs.

The list of software companies that are compatible is really long. How do I even begin to work out which one I should go with?

There are many different software options out there to suit a range of budgets and businesses. There are factors that should be considered first. These include functionality, features and update processes. Ask yourself if they provide the support that your business needs. 

Cost is a key factor. If you are already using cloud accounting software, you don’t need to pay any extra fees to be compliant. So it could cost as little as £5 per month (with Xero right now) to be ready.

Plus, you’ll get all of the other benefits of using a smart, helpful platform. With Xero for example, you can use it to get paid on time, manage payroll and produce invoices. You might not get this with an option that is free.

This is the first I’ve heard of Making Tax Digital? Do I have enough time to get set up to succeed?  

You might not have enough time before 7th October. But with the grace period, you’ll have plenty of time to get ready.

It’s worth double checking with your accountant if you have one as they might have this all covered for you.

If you don’t work with an accountant, it shouldn’t take more than 72 hours to receive confirmation from HMRC that you can submit. Once this has happened, you’ll be able to submit from your accountancy software platform (which also takes no time at all to set up). Xero is offering a 50% subscription for any new users this month.

Find out more at our resource centre here.

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Source: Xero Blog