Digital tax for VAT-registered salons and barbershops from 2019

Salons and barbershops who pay VAT will have to change the way they do their VAT returns from April 2019.

New rules called ‘Making Tax Digital’ will require VAT-registered businesses to ‘go digital’. Find out what’s involved and get ahead of the curve.

 This blog post covers:

• What is ‘Making Tax Digital’?
• The benefits of Making Tax Digital
• Return deadlines
• What is MTD-compatible software?
• Where do I find MTD-compatible software?
• When do the rules start for me?
• What should my accountant do?
• Checklist

 What is ‘Making Tax Digital’?

The government’s Making Tax Digital (MTD) rules will apply to your salon or barbershop from 1 April 2019 if you are above the VAT threshold (currently £85,000). MTD will also apply to businesses who use the VAT Flat Rate Scheme.

The new rules mean that you will have to:

• Keep digital (electronic) VAT records.
• File your VAT returns using MTD-compatible software.

Making Tax Digital does not require you to keep any additional records.  

The benefits of MTD

By keeping up-to-date digital records in real time you will be less likely to lose receipts. Digital records can also reduce the risk of errors due to lost or incorrectly recorded invoices. Over time, nudges or prompts will be introduced into the software to help eliminate common errors.

Digital record keeping will also reduce the risk of unwelcome and costly HMRC compliance interventions and help you manage your cash flow more effectively.

Find out how to take control of your cash flow.

This guide will help you understand the basics of financial management for your business including tax, VAT, accounting and record keeping. It’s available to NHBF Members only. Not yet a Member? Join today.

Return deadlines

The deadlines for sending VAT returns and making payments will not change, including monthly, quarterly and annual VAT returns.

 What is MTD-compatible software?

 You or your accountant may already store all your business and financial information in an electronic format.

 However, under Making Tax Digital you must use software that can:

• Keep your VAT information in the digital format required by Making Tax Digital.
• Prepare your VAT return based on this information.
• Communicate with HMRC by sending and receiving files via its Application Programming Interface (API) platform.

The MTD software will ask you to confirm that your return is correct and that you want to submit it to HMRC. You will then receive confirmation that HMRC has received your return.

 If you are above the VAT threshold it is advisable to move to MTD-compatible software as soon as possible.

 Where do I find MTD-compatible software?

 HMRC is currently working with a wide range of software suppliers to develop suitable software.

 You’ll need to check if your current software provider will be able to offer MTD-compatible software.

Could you get a better deal by changing your business bank account? Find out more.

 When do the rules start for me?

 Making Tax Digital will apply to your VAT returns from your first VAT period on or after 1 April 2019. (Making Tax Digital will apply to other taxes after April 2020 at the earliest.)

 What does my accountant or bookkeeper need to do?

 If you already have an accountant or bookkeeper who sorts out your VAT returns for you, they can continue to do so under Making Tax Digital. However, they will need to:

• Use MTD-compatible software.
• Sign up to a new ‘HMRC agent services account’ so they can use Making Tax Digital services on your behalf.

Not sure which accountancy services you need? Find out what’s on offer to NHBF Members and how to go about choosing an accountant.

 Find accountants who are NHBF Trade Members.

Checklist

• If you pay VAT, you must go digital from April next year.
• You’ll need to use MTD-compatible software.
• Your bookkeeper or accountant can still do your VAT returns but must use the correct software.
• MTD-compatible software is currently being developed. (NHBF Trade Member GoSimple Software Limited is on the approved list of MTD-compatible software suppliers.)

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