Chartered Accountants and Professional Business Advisers

Making Tax Digital (MTD) is the Government’s initiative to digitise the tax system. It’s aimed at making it easier for individuals and businesses to get their tax right and stay on top of their tax affairs. But what does this mean for VAT?

MTD for individuals is currently on the back burner, with no firm timetable for implementation. However, HMRC is pressing ahead with MTD for businesses and this consists of two components: VAT and corporation tax. MTD for VAT will take effect from April 2019, but there isn’t a firm date for corporation tax yet.

MTD for VAT applies to all businesses Wrong – not yet! MTD for VAT will be mandatory for VAT periods starting on or after 1 April 2019 but only for VAT-registered UK businesses with more than £85,000 of taxable supplies.

Records have to be kept digitally - Correct – although HMRC has not defined exactly what this means Most businesses keep their records in an accounting package anyway, and those that don’t will most likely benefit from moving to one. However, ‘digitally’ simply means ‘electronically’ so if you kept your accounting records on an Excel spreadsheet then that would appear to be compliant. There are some mandatory requirements and further information can be found in the recently published HMRC VAT Notice 700/22. Visit: https://www.gov.uk/government/publications/vat-notice-70022-making-tax-digital-for-vat/vatnotice-70022-making-tax-digital-for-vat

It’s clear that HMRC doesn’t expect you to keep manual records for your accounts going forward. Please note that this only applies to VAT at this stage.

Detailed transactions must be submitted with VAT returns Wrong – this is an optional requirement for now. You have the choice of whether or not to submit detailed transactional data along with your VAT return but so far HMRC has not published details of what this should consist of. HMRC could make this mandatory in the future.

I will need special software from April 2019 to make MTD submissions - Correct

To make an MTD VAT submission you havetwo options.
1. Keep your records on MTD-compliant accounting software and make the submission using that.
2. If you keep your records another way (on Excel, for example) then you can use stand-alone specialist software to make the MTD submission, as long as the link between your records and the standalone specialist software is digital. It will be acceptable to use several software programs that together make up your digital VAT records but it will be mandatory for the links between those programs to be digital. So no rekeyingor copying and pasting!

VAT returns can be submitted through HMRC’s website after April 2019 Wrong

Even though the information HMRC will receive is exactly the same, you will no longer be able to make submissions using the Government Gateway HMRC website. You will have to use specialist MTDcompliant software.
HMRC has been working closely with the software industry and has published a list of the software suppliers that support MTD: https://www.gov.uk/government/publications/software-supplierssupporting-making-tax-digital-for-vat/software-suppliers-supporting-making-taxdigital-for-vat

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