Taxing times…

Is your salon business VAT-registered? If so, you’ll have to change the way you do your VAT returns from April 2019, explains NHF chief executive Hilary Hall.

New rules called ‘Making Tax Digital’ will require VAT-registered businesses to keep electronic VAT records and file VAT returns using software that’s compatible with the new system. While VAT returns are already submitted online, it will no longer be possible to prepare your information using spreadsheets and then enter your figures manually.

Who is affected?

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

However, you will not need to keep any additional records, and the deadlines for sending VAT returns and making payments will not change, including monthly, quarterly and annual VAT returns.

MTD-compatible software

You may already store your financial information in an electronic format, but under Making Tax Digital you must use specific software. MTD-compatible software will:

• Store your VAT information in the correct format.
• Prepare your VAT return as required by the new system.
• Send your VAT return to HMRC using its API (Application Programming Interface) platform.

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

If you are above the VAT threshold, it’s a good idea to be prepared and move to MTD-compatible software as soon as possible. Check if your current software provider will be able to offer the software. If not, you will need to look elsewhere. NHF Trade Member GoSimple Software Limited (nhf.info/gosimple) is on the approved list of MTD-compatible suppliers, or you can find approved suppliers on the HMRC website.

Cut-off dates

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

If you have an accountant or bookkeeper who sorts out your VAT returns for you, they can continue to do so under MTD. However, they will need to sign up to a new ‘HMRC agent services account’ and must use MTD-compatible software.

The NHF offers a range of business support services for hair and beauty salons, from legal, employment and financial guidance to expert advice for managing people and boosting your business.

See more at nhf.info