Many local businesses are preparing for changes to tax from on Monday.

In just a few days' time, all VAT registered businesses with a taxable turnover above the VAT threshold (currently £85,000), will be required to keep VAT records and file VAT returns using Making Tax Digital compatible software.

It is becoming increasingly common for business records and accounts to be kept digitally, within computer programmes, a smart phone application or cloud-based devices.

The main difference under Making Tax Digital is the software which businesses use must be capable of keeping and maintaining the records specified in the regulations, preparing VAT returns using the information maintained in those digital records, and communicating with HMRC digitally via the government’s Application Programming Interface (API) platform.

For VAT, Making Tax Digital doesn’t change how often businesses have to send information to HMRC, but rather how they do it. The changes will require all eligible businesses to have Making Tax Digital software in place.

The British Chambers of Commerce and Herefordshire & Worcestershire Chamber of Commerce have previously expressed concerns about the timing of the implementation of Making Tax Digital. However, once in place businesses are likely to benefit from faster and more efficient VAT accounting and returns.

Making Tax Digital should alleviate some pressures for businesses, reducing revenue losses due to avoidable mistakes on VAT returns, for example.

Eliminating many of the existing paper-based processes is more proficient and reduces the margins for error. Digital tax accounts also mean that customers can see the information HMRC holds and allows businesses to check that their details are complete and correct at any time, in addition to seeing tax in ‘real’ time.

For more information regarding Making Tax Digital, and to download a copy of our digital brochure in association with Worcestershire Business Central and Bishop Fleming, go to hwchamber.co.uk/support/policy/making-tax-digital/.