The deadline for businesses with a turnover above the VAT threshold to keep digital records and provide regular digital updates to HMRC for VAT purposes using Making Tax Digital (MTD) for VAT is fast approaching.
From April 2019, businesses with a turnover above the VAT threshold (currently £85,000) will be required to keep their records digitally (for VAT purposes only). This means that they will need to provide their VAT return information directly to HMRC through MTD functional compatible software.
Our bookkeeping platform of choice is Xero for 99% of our clients as it is simple to use and easy for us to train you how to do your own bookkeeping. For retail clients requiring stock management then we recommend Sage200, however.
Please get in touch about how we can implement those systems for your business. We are moving all VAT registered clients to digital systems now if their year end overlaps April 2019.
The requirement to keep digital records and file VAT returns using MTD-compatible software will start from the first VAT accounting period that starts on or after 1 April 2019. The deadlines for sending VAT returns and making payments are not changing, including for monthly, quarterly and annual VAT return schemes.
The digital record keeping and filing requirements are relaxed in certain circumstances such as for businesses using one of HMRC’s retail schemes or the flat rate scheme. During the first year of MTD for VAT, businesses or groups who use more than one software programme to keep their VAT records and prepare and file returns will not be required to have digital links between those software programmes. However, this exception will not apply where the sole purpose of having a second software programme is to submit VAT return data to HMRC.
HMRC has been working with an ever-growing number of software suppliers to ensure that their software supports MTD for VAT. A number of these software suppliers are working with VAT registered businesses and HMRC as part of the initial phase of the MTD pilot in which HMRC is testing the service with small numbers of invited businesses and agents. HMRC launched this initial private beta pilot of Making Tax Digital for VAT in April 2018 and the pilot is expected to be widened later this year with more businesses being invited to join.
VAT registered businesses need to review their current accounting setup to see what, if any, upgrades will be required. Businesses that are keeping manual VAT records will need to look at new systems. Spreadsheet users will need bridging software or API-enabled spreadsheets to digitally submit the VAT return data to HMRC. Even those using suitable VAT accounting software will need to check that their software provider will be ready on time for MTD.
We can help you ensure that your records are being properly kept in the right MTD approved digital format before MTD goes live. For the time being, businesses will not be asked to keep digital records, or to update HMRC for other taxes until ‘at least’ 2020. It is possible that this date will slip as HMRC prepares for the enormous technical challenge of introducing MTD. However, any investment or changes in software should also consider the upcoming changes as more taxes fall under MTD.
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