April 1 2019 marked a further step in HMRC’s ambition to become one of the most digitally advanced tax administrations in the world, with the introduction of Making Tax Digital for VAT.
From this date it will be compulsory for all businesses with an annual taxable turnover of £85,000 or over to keep their VAT records digitally and to also submit their VAT returns digitally. Taxable turnover consists of the total net value of everything a business sells that is not exempt from VAT, which includes standard, zero and reduced rated goods/services, over a rolling twelve months.
Making Tax Digital (MTD) consists of 2 main requirements, the first requirement is that all required businesses must keep their VAT records digitally. Businesses that are already using some sort of accounting software or who record their VAT information and returns on a spreadsheet, should already be compliant with this part of MTD. Those who keep their records on paper are going to need to make changes and start either using a spreadsheet and bridging software or accounting software to ensure they are compliant.
The second requirement for MTD is submitting the VAT return digitally. Currently all VAT returns are submitted via HMRC’s government gateway. Businesses that fall under MTD will firstly be required to register their business via gov.uk, once registered they will no longer be able to use HMRC’s government gateway or their existing software for submitting their VAT returns. Instead they will need to submit their figures using either MTD updated accounting software or bridging software. HMRC will only require businesses to submit the usual 9 box figures from the VAT return, they will not require them to submit their digital records or any additional information.
It is important to note for all businesses that must be complaint with MTD, that it is their responsibility to ensure they sign up for and become compliant with MTD. HMRC will not automatically register for MTD those businesses whose taxable turnover is over £85,000. Your business will still be able to submit its VAT return using the current government gateway online or the current method on your accounting software until it registers for MTD, at which stage the old system will be turned off for your business. Required businesses will need to register for MTD from their first full VAT quarter after 1 April 2019, for example if your next VAT quarter ends on 30 April 2019, you will not need to become compliant until 1 May 2019 for quarter ending 31 July 2019. It is recommended that businesses allow at least 24 hours after submitting their last non-MTD VAT return before signing up to MTD. HMRC will send confirmation within 72 hours confirming set up has been completed and you should not try to submit an MTD VAT return until this time. Businesses that pay their VAT by direct debit must wait 5 days after submitting their last non MTD VAT return before signing up for MTD and they must be signed up at least 7 working days before the first MTD VAT return is filed.
For further information and a list of all approved accounting and bridging software go to HMRC’s website at gov.uk and search Help and Support for Making Tax Digital or contact an accounting professional for more advice.