MTD For VAT – Are You Ready?

Making Tax Digital
MTD for VAT – Are you Ready?

Making Tax Digital for VAT (MTD) is fast approaching, but are you ready for when it arrives?

What is Making Tax Digital for VAT?

Per HMRC Making Tax Digital is a key part of the government’s plans to ensure individuals and businesses keep on top of their tax affairs and get their tax right.

It requires all VAT Registered businesses, whose taxable turnover is over the VAT threshold of £85,000 to keep records digitally on “functional compatible software” and to submit their VAT returns through the software. This includes limited companies, unincorporated businesses, partnerships, LLPs, charities and non-UK businesses registered for UK VAT.

When does Making Tax Digital start?

Making Tax Digital becomes a mandatory requirement on the 1 April 2019.  This means that businesses with VAT Returns for quarters starting 1 April 2019 will need to be keeping digital records from that date, and will need to submit their VAT Return to 30 June 2019 to HMRC through software and not through the current Government Gateway that they may be using.

There are some very limited exceptions for VAT Registered businesses with more complex requirements, and there is a 6 month deferral for businesses who fall into one of the following categories:

  • Trusts
  • ‘not for profit’ organisations that are not companies
  • VAT divisions and VAT groups
  • Annual accounting scheme users
  • Public sector entities that are required to provide additional information alongside their VAT return
  • Local authorities and public corporations
  • Traders based overseas
  • Those required to make payments on account

What is “Functional Compatible Software”?

Per HMRC Functional Compatible Software is “a software program or set of software programs that must be able to:

  • Record and preserve digital records
  • Provide to HMRC information and returns from data held in those digital records by using HMRCs Application Programming Interface (API) platform
  • Receive information from HMRC via the API platform”

HMRC have a list of software providers whose software is MTD compliant. You can find the list here(hyperlink: https://www.gov.uk/guidance/software-for-sending-income-tax-updates)

 

What information do I need to keep digitally?

The following information must be kept, maintained and preserved in digital form:

  • your business name
  • the address of your principal place of business
  • your VAT registration number
  • any VAT accounting schemes that you use

 

In addition the following information needs to be recorded for each supply that is made or received:

  • time of supply
  • value of the supply (net value)
  • rate of VAT charged

The time of supply is the date on the VAT invoice, or if you are on a cash accounting scheme, when you pay for the supply.

This only includes supplies that would normally be on your VAT Return.  Supplies that do not go on the VAT Return would not be covered by these rules i.e. wages paid to an employee.

Finally the software should contain the totals for each box on the VAT Return, to support the figures included on the VAT Return.

So the final Question to ask is – Are you Ready?

  • Is your turnover over the VAT threshold of £85,000?
  • Do you currently submit your VAT Return through the HMRC Government Gateway?
  • Are your records kept digitally?
  • If not, do you know which software you will use?
  • Do you have a plan in place for transitioning to software?

If you want more information regarding Making Tax Digital we will be holding an MTD Workshop on 7 February where we will go through MTD in more detail and have demonstrations of some of the software available.  For more information e-mail Juliet.coleman@grantsellers.co.uk 

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