Making Tax Digital, the government scheme for transforming tax administration by moving it entirely online, has rarely been out of the news this year. The majority of VAT-registered businesses with a taxable turnover above the VAT threshold are now required to use the MTD service to keep records digitally and use software to submit VAT returns.
Last year, the government announced that the compliance date for MTD would be deferred by six months for more complex businesses. These included trusts, 'not-for-profit' businesses which aren't registered as companies (such as some charities), local authorities and public corporations, VAT groups and annual accounting scheme users.
If you own a small business in the hospitality industry such as a tea room or cafe, you may well fall into the latter category. The VAT annual accounting scheme helps SMEs by permitting them to submit one VAT return annually instead of the usual four. During the year, these businesses can pay instalments towards the return which are based on the estimated liability for the year, and then pay the remaining balance when the return is due. The scheme is intended to reduce administration and help manage budgeting and cash flow.
It's an extremely helpful system for people who are working all available hours to keep their businesses afloat, and there are a significant number of these in the hospitality industry. Sourcing ingredients, cooking to order, keeping menus fresh and enticing, marketing, licensing and keeping up with ever-changing hygiene requirements are just some of the calls on the time of busy and committed catering entrepreneurs.
Having extra time to organise VAT payments under MTD provided a bit of breathing space, but now the deferred deadline starting on or after 1st October 2019, is rapidly approaching. Make sure you are compliant or you could end up having to pay a penalty, a ruinous prospect for a small business.
If preparing your business for MTD seems like an insurmountable problem, a professional hospitality accountant can take the weight off your shoulders. Here at Perrys, we have extensive experience working with businesses in the hospitality sector. Get in touch and let our friendly team serve you up some practical and helpful advice.
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