HMRC has published the Making Tax Digital (MTD) rules. What do you need to know?
The rules
These were published in the VAT Notice 700/22.
Which business do the rules apply to?
From 1 April 2019, all business with a taxable turnover that exceeds the VAT registration threshold (currently £85,000) are required to store their VAT records digitally and submit VAT returns via an interface with HMRC software.
If the turnover subsequently falls below the threshold the business will still be required to comply with the rules unless you deregister. The rules apply from the first VAT period starting on or after 1 April 2019.
Only businesses with taxable turnover that has never exceeded the VAT registration threshold will be exempt from Making Tax Digital in 2019. You will therefore need to keep an eye on your taxable turnover, especially if you think it is close to the VAT registration threshold.
Which records need to be recorded digitally?
- the business name
- the address of the principal place of business
- the VAT registration number
- any VAT accounting schemes that the business uses
For each supply the business makes you must record the:
- time of supply (tax point)
- value of the supply (net value excluding VAT)
- rate of VAT charged
For each supply the business receives you must record the:
- time of supply (tax point)
- value of the supply
- amount of input tax that will be claimed
How will the VAT return be submitted?
From April 2019 submissions must be made using MTD compliant software.
Digital record keeping
All VAT registered businesses must keep and preserve certain records and accounts. Under MTD records must be kept digitally within functional compatible software.
Paperless businesses?
Sadly not, there are some records that by law must be kept and preserved in their original form either for VAT purposes or other tax purposes. With this in mind you will need a software solution with well organised supporting paper records.
Soft landing
HMRC has announced that there will be a soft landing of MTD, allowing a period of time for businesses to adjust.
Software options
At a4c we are Xero Silver Partners and as an approved MTD software option we will continue to promote this to our clients.
More information
You can read the full VAT Notice here: VAT 700/22
If you are a VAT registered business and don’t have MTD compliant software in place then now is the time to take action.