Making tax digital
Whats it all about ?
From April 2019 VAT registered businesses and organisations with taxable turnover above the VAT threshold of £85,000 will be required to:
Maintain their accounting records digitally in a software product or spreadsheet. Maintaining paper records will cease to meet the legal requirements in tax legislation.
Submit their VAT returns to HMRC using a functional compatible software product that can access HMRC’s API (Application Program Interfaces) platform.
The requirements do not apply to VAT registered businesses with taxable turnover below the VAT threshold (eg, those that have registered voluntarily).
HMRC has announced a deferral to the start date of 6 months for more "complex businesses" – details below.
Businesses within scope will need to acquire a suitable commercial software product or appoint an agent to submit returns to HMRC on their behalf.
HMRC’s online VAT return will remain available only to businesses that are not within the scope of MTD for VAT (eg, businesses that complete a VAT return but have taxable turnover below the VAT threshold).
No changes are being made to:
VAT rules other than those that relate to record keeping and filing.
The amount of information submitted to HMRC; the VAT return will contain the same nine boxes that it does currently though the regulations do allow for additional information to be submitted on a voluntary basis.
The current filing and payment deadlines for VAT.
When does it start ?
VAT registered businesses and organisations will have to keep digital records and submit VAT returns using compatible software from the start of their first VAT return period beginning on or after 1 April 2019.
Exemptions & Schemes
Those that are not currently exempt from VAT online filing may find it difficult to persuade HMRC that the exemption should apply. HMRC is expected to issue further guidance on applying for exemption. The current process is to phone the VAT helpline or make a written request, but applications for exemption from MTD for VAT cannot be made until further guidance is published and HMRC’s internal processes are in place.
Retailers will be able to record gross daily takings (not weekly, monthly or quarterly) rather than each individual transaction. This means that there does not need to be a digital link between tills and the accounting records; recording the daily totals in the digital accounting records meets the requirements. Many businesses are using a retail scheme without understanding that they are doing so.
Flat rate schemes
The flat rate scheme will continue and digital records of supplies received will not be required (unless they relate to capital items which cost more than £2,000 including VAT).
The additional records required for margin schemes and the calculation of the marginal VAT charged do not need to be kept in digital form. These records must still be maintained in some format.
There are dozens of providers widely available. However some may be better tailored to your business than others. Please call us for information on MTD compatible software and how to choose a suitable product for your business.
HMRC is working closely with software providers to ensure a range of suitable products will be available at a variety of price points. It is unlikely that a free software product with MTD for VAT functionality will become available.
The use of spreadsheets, either to record individual transactions or as part of a suite of software and spreadsheets is permitted. However, an existing spreadsheet alone is not a free way to comply with the MTD for VAT requirements as it will not have the functionality to file the return. Spreadsheets will need to be either API enabled or, more likely, used in combination with a commercial MTD compatible software product or spreadsheet so that data can be sent to and received from HMRC systems.
If you have any questions or would like to start the MTD transition, please call us or drop in for a chat