Making Tax Digital for VAT – Are you ready?
What is Making Tax Digital?
A change in the law, coming into effect on the 1st April 2019, means that all VAT registered companies (those with a turnover of £85,000 or more) will need to file and store their VAT records digitally. 98% of UK businesses will need to alter the way they submit VAT.
This is the biggest change in VAT legislation in recent history and is being called Make Tax Digital (MTD). We have compiled this Q and A guide to determine if you are MTD ready and how to get there if you are not currently.
Does Making Tax Digital affect me?
That depends on the turnover of your company. If you have a turnover of £85,000 or more then MTD will become compulsory for you from April of 2019. If your VAT registered company is below the threshold currently then becoming MTD compliant is optional. HMRC are encouraging businesses with a taxable turnover below the VAT threshold to sign up so they can also benefit from MTD.
What do I need to do to be MTD ready?
You will need to keep all of your business records digitally from the beginning of your next VAT quarter. You will need to submit your VAT returns (or if you are a client of ours we will do this for you) using Making Tax Digital (MTD) compatible software.
Is there a list of MTD compatible software?
Yes, HMRC has issued a list of software suppliers that comply with the scheme. You can find it here.
What happens if the software I currently use for accounting is not MTD compliant?
HMRC have defined a term of ‘soft landing’ where it is acceptable to copy and paste from a spreadsheet to submit information using MTD software. After March 2020, however, copy and paste will not be permitted. There is the option to use bridging software to share data created in software that is not MTD compliant.
Does MTD for VAT apply to all VAT schemes?
There are many VAT schemes and some (like the Flat Rate Scheme) are more common than others. VAT Notice 700/22 explains what details must be recorded and preserved digitally. Any records that you currently need to retain but are not specified in this VAT notice can be retained either digitally or in another format (e.g. on paper).
It is a good idea for all businesses to have their financial information processed and stored digitally with immediate effect. There will be more enforcement coming online in 2020 that will refer to other parts of accounting practice and the use of digital software. Our team of experts will be happy to speak to you to provide advice on what these changes mean to your business. As a client of Byte you are safe in the knowledge you are Making Tax Digital ready and comply with the legislation. That means you have more time to focus on running your business.