You may have read in the press or received communications direct from HMRC regarding the introduction of Making Tax Digital. We set out to explain a little more about what Making Tax Digital is and how we can help you prepare.
What is Making Tax Digital?
HMRC is planning significant changes to the administration of tax. For the first time, the government has now mandated that business records must be kept electronically. A summary extracted from those records must be submitted electronically to HMRC every quarter using compliant software. The first tax to be affected will be VAT. Further changes are planned for income tax, including for landlords, but these have been deferred until at least April 2020. There are no immediate plans to submit every single transaction included in the business records to HMRC, but MTD lays the technical groundwork for this development in the future.
When does MTD for VAT start?
MTD comes into force for VAT periods beginning on or after 1 April 2019. There are certain exemptions for particular businesses (particularly charities, VAT groups, VAT divisions, overseas trades and annual accounting scheme users) deferring the start date to 1 October 2019. There is a year’s grace period for businesses to establish compliant digital links (see below) between the business records database and the software.
What should I be doing to prepare my VAT registered business for MTD?
The most important issue now is to select an MTD compliant software package (see below). This is particularly important if you are dependent on industry specific software such as software for solicitors, garages, or estate agents.
If you have instructed SBPK to act for you on VAT matters and we file your VAT returns for you, we will be working with you to ensure your records are maintained on compliant software.
You can participate in trials for the MTD software by registering at https://www.gov.uk/guidance/use-software-to-submit-your-vat-returns
your government gateway ID and
the address with which you are registered with HMRC for VAT.
your effective date of registration.
The latter details can be found on your VAT registration certificate (form VAT 4), or on HMRC’s website if you log in using your government gateway credentials.
Can I keep my VAT software separately from my business records?
The rule states that the underlying records software needs to be “digitally linked” to the submitting software. HMRC do not accepting typing or cut-and-paste. However, transferring complete files by USB stick, by file sharing sites on the internet or by email seem to be acceptable, provided the import process is automated. More integrated links involving direct transfer of data between filing and database software are also compliant.
What software is compliant with MTD?
HMRC have a list of compliant software on their website. There are some very low-cost providers which work with spreadsheets, but these products are unsophisticated and may not be suitable. There are a number of