// EXPERT PROFILE //
How to get MTD compliance right
THE FIRST TIME
From April 2022 , all UK VAT-registered businesses will need to comply with HMRC ’ s new digital tax legislation , known as Making Tax Digital ( MTD ). It means those still submitting paper-based records will have to shift to maintaining records online and filing VAT returns digitally , with around 1.1m smaller businesses likely to be affected . Damon Anderson , Director of Operations , UK & EMEA , Xero , discusses how businesses can get up to speed , access support and education and , most importantly , use MTD as an opportunity to digitise their business .
“
A GREAT PLACE
TO START IS THE DEDICATED HMRC WEBSITE , OUTLINING EVERYTHING
FROM HOW TO SIGN UP , TO
WHETHER ONE ’ S BUSINESS IS
EVEN ELIGIBLE .
HE MORE THINGS change ,
T the more they stay the same . While small businesses can breathe a sigh of relief that the challenges of the last two pandemic-dominated years are behind them , they can also point to an array of new issues set to take their place . If lockdowns are a thing of the past , the cost-of-living crisis – from inflation to rising energy prices – is very much alive and causing disruption .
Given this sense of déjà vu , it ’ s understandable that many small businesses are prioritising short-term goals over long-term planning , with Xero research finding that seven out of 10 SMEs remain focused on day-to-day survival , as opposed to how to better run their company for the future . This shift in business mentality has caused shockwaves that can be felt throughout the small business community , particularly as the obstacles seem to be arriving thick and fast .
Many SMEs will view the next phase of Making Tax Digital ( MTD ) for VAT as one of these obstacles . While some may have been able to keep the MTD deadlines at arm ’ s length so far – either due to an unwillingness to embrace digitalisation or a simple lack of understanding – it is now an urgent requirement , with compliance required from April 2022 .
This means that SMEs submitting VAT through the online HMRC portal , or the post , must start maintaining their records digitally using HMRC-recognised software . This phase of MTD for VAT will affect all VAT-registered businesses that have a taxable turnover of under £ 85,000 and failure to comply may result in fines .
Despite this , many small businesses across the UK that fit the criteria have continued to delay the transition to MTD , with recent research showing that more than 600,000 of them risk compliance failures for not adequately preparing for MTD before the government deadline .
Of course , a government mandated change to the tax system may well be very daunting for some and even serve to push small business leaders away from adopting digital processes all together . But the change can be a positive one – a catalyst for further digital adoption to gain a greater edge .
The steps outlined below can serve as a guide to help small business leaders comply with MTD for VAT and with as little friction as possible .
Understand the ins and outs of MTD
Like most legislative changes , MTD for VAT includes multiple moving parts that business owners must get their heads around . A great place to start is the dedicated HMRC website ,
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