MAKING TAX DIGITAL

VAT RETURN FILED  FROM APRIL 2019 ONWARD

For  a VAT-registered business with a taxable turnover above the VAT registration threshold (currently £85,000) you are required to keep digital VAT business records and upload returns using software for VAT periods starting on or after 1 April 2019. This also applies to other VAT entities, such as charities, government bodies and limited companies 

VAT  registered businesses currently file their VAT returns online through the Government Gateway website after the VAT return that  has been prepared either manually or on a software. From April  2019 this will change. VAT returns  will have to be filed  via a software, easily put. HMRC  has extended the requirement for full compliance  to April 2021 but records must be maintained.

Paper records will no longer work with Making Tax Digital (MTD). The new rules require a separate electronic record for each VAT supply made or received; the totals can only be transferred from a digital format onto the online filing. This requires a digital link between the figures in a business’s accounting software and its VAT return filed with HMRC. This will enable a business’s software to communicate directly with HMRC’s system. 
 

Business  that  are using old software will have to obtain new MTD compliant software.

Spreadsheets will be a  challenge for those keeping records on a spreadsheet. Initially  HMRC said businesses would not be able to use spreadsheets to make their returns but  more recently it reversed this position. However, businesses will still need to obtain a bridging product/ interface to compile  a VAT return from the  various cells and upload it to HMRC.

The interface can be purchased at a very reasonable price.

Businesses that will be captured by MTD

Not every business  which files a VAT return will need to use MTD. The new system will only apply to VAT-registered businesses with taxable turnover above the VAT threshold, currently £85,000. 

The rules for calculating taxable turnover have not changed, and will still need to be applied over a rolling 12-month period.

Property rental businesses will also be affected if  they are VAT  registered.

MTD does not require you to keep additional records for VAT, but to record them digitally.