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Making Tax Digital for VAT – Are you ready?

by | Aug 10, 2018 | Tax

Due to the Coronavirus pandemic, the government has announced back in April 2020 that it will be postponing the implementation of Making Tax Digital (MTD) until April 2021.

Below is the email confirmation we have received from HMRC:

COVID-19 is creating extremely difficult times for all, and we are committed to helping in every way possible all those businesses facing unprecedented challenges. Therefore, we are providing all MTD businesses with more time to put in place digital links between all parts of their functional compatible software. This means that all businesses now have until their first VAT return period starting on or after 1 April 2021 to put digital links in place

Making Tax Digital (MTD) for VAT is the Government’s first phase in what they believe is making tax administration more effective, efficient and easier for taxpayers. The Government has said that one of the main reasons behind the MTD scheme is to help businesses “get their tax right”.

Will MTD affect me?

If you are a VAT registered business with an annual turnover above the VAT threshold (currently £85,000), you will be required to keep digital records and submit VAT returns using MTD-compatible software from 1 April 2019. The digital records must include:

  • The business name, place of business and VAT number
  • The VAT account including the audit trail from the primary records to the VAT return
  • Details on supplies made and received

These digital records will need to be kept for up to six years.

My VAT return straddles 1 April – what do I do?

If your VAT quarter does not start on 1 April 2019, then the first VAT return beginning after 1 April will be the first return you need to be MTD compliant. So if your VAT quarter end is 31 May, then from 1 June 2019 onwards, your VAT returns must comply with MTD.

Will the deadlines for VAT submissions be changing too?

The deadlines for filing the VAT return and payment of VAT due will be exactly the same as they are now, they will not be changing.

Will my spreadsheet count as a digital record?

Spreadsheets will not be classed as a digital record for MTD purposes unless they can connect to HMRC via an Application Programming Interface (API). Specific software will be needed to submit the relevant information to HMRC.

I am VAT registered with turnover under the threshold, what do I do?

If your turnover is below the VAT threshold, then you may voluntarily join MTD for VAT if you so wish, but it will not be compulsory to do. If your turnover was over the threshold and you are subscribed to MTD for VAT once 1 April 2019 passes, and then it drops below the threshold, you must remain MTD compliant until you deregister from VAT.

What’s next for Making Tax Digital?

The Government’s plan is to role MTD out across all aspects of tax but as and when dates for compliance are announced, we will be sure to keep you informed.

How we can help

In due course, MTD will impact all business. As accountants, we are here to help you with the changes ahead so if you need any further information, please free feel to contact us.

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