Although some areas of Making Tax Digital (MTD), such as Income Tax and Corporation Tax, have been put on hold until at least April 2020, from 1st April next year, UK VAT-registered businesses that are above the threshold (currently £85k) will begin submitting their VAT returns to HMRC digitally. This means that companies will have to keep digital records and use MTD-compatible online accounting software for submission. We take a look here at what Xero is doing to make the transition to MTD as smooth as possible.
N.B. A business with a 30th June 2018 year-end will need to use MTD-compatible software from 1 July 2018 onwards to allow for fulfilling the MTD requirements from April 2019.
- Xero is on the current VAT commercial software suppliers list and therefore approved to support VAT submissions to HMRC and there will be a curated list of products that are MTD-ready published by HMRC later this year.
- Xero customers are already able to submit VAT returns using Xero, but in addition, Xero is currently testing a new VAT return experience and workflow with HMRC. This will support the changes that MTD introduces. Xero’s new MTD VAT will soon be available to customers and there will be no upgrade fees. Xero customers and partners will be able to participate in the trial of Xero’s MTD VAT in beta – so keep a lookout for when the trial starts and what the qualifying criteria are.
- Filing VAT returns with Xero MTD VAT will be a different experience to the VAT experience in Xero today. Although the VAT return is the same, rather than people choosing dates for a return themselves, HMRC will provide the returns to software. There will also be the facility for people to make any adjustments to the return before they submit it online. Once the VAT return process has been clarified with HMRC, Xero customers and partners will be notified of any other changes and differences.
In order to avoid implementing new software part way through their financial year, many businesses will need to make a decision about their accounting software soon.
If you are already using Xero to submit VAT returns, you can be assured that all subscriptions currently supporting the submission of VAT returns will be updated for MTD VAT returns. Make sure you are using one of the standard Xero business edition subscriptions, or Xero VAT Cashbook, which we, as a Xero Partner, can provide for you at OutserveWeb. Accounting firms will need to ensure their clients are using the correct software (Xero business edition or Xero VAT Cashbook). We can advise on this and help with implementation on behalf of your clients.
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