The first step in the Government’s goal to get all tax submissions digital begins in April 2019. They are, thankfully, starting with one avenue before tackling the rest – and that is VAT submissions. In this blog post I highlight what you need to know and how you can make sure you are ready.
Who does this deadline affect?
This will apply to businesses with a turnover above the VAT threshold (and are VAT registered).
So, to take a quote directly from the Gov.uk website:
“If you run 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 send returns using Making Tax Digital (MTD)-compatible software.”
What are “digital VAT business records”?
Basically, you will need to ensure that the way you record your accounts is in a format that can be easily transferred online to HMRC.
But (there is always a but) – this does not mean that you can purely record (for example) in an Excel doc…and “upload” this file directly when you are submitting your VAT return. You will need to use a MTD compatible software to transfer the information in the right format. For Excel users this will be MTD compliant bridging software.
If you are currently using an accounting software (especially a cloud based one) like Sage, Xero, Kashflow, Quickbooks or other similar ones – they will be looking to be ready for this integration. You can check this Gov.uk webpage to see if your software is listed as MTD ready: “Find software suppliers for sending VAT returns and Income tax updates”.
When do I need to take action?
Now. This comes into play April 2019, which means that you will need to ensure that you are completing your accounting records for the current VAT period in the right format – or at least have a solution as to what MTD Compatible software you are going to implement to submit your returns. HMRC require you to have started with the digital records from the beginning of your accounting period – so you will have some work to get that up to date (if you haven’t already).
If your business qualifies for MTD for VAT you have to file your first MTD-compliant return for your first VAT period starting on or after 1st April 2019. If your VAT accounting period spans the 1st April 2019 start date, the return for this period does not fall under MTD. In this case, your next return will be the first that has to be MTD compliant. For example, if your VAT quarter runs from 1st March to 31st May 2019, this return does not need to be under MTD. Your first compulsory MTD VAT submission will be for the quarter ending 31st August 2019.
For the many businesses whose VAT quarter ends are the calendar quarters (March, June, September and December) their first MTD return will be for the period ended 30th June 2019.
If you want to check the list of accounting software and ‘bridging’ software that is already MTD-compatible – you can check this list: ‘Software for sending income tax updates’.
For the small minority of clients who weren’t keeping digital records, we have been working with them over the past year to bring their records in line and in a format which we can use our bridging software to submit their VAT returns for them.
When will Income and Corporation Tax be MTD?
For now, these two tax areas are on hold until at least 2020. Once we get further clarity on this, we’ll let you know in a blog post or, if you are on our mailing list – we’ll let you know through there as well.
If you have any questions about MTD, please contact us via email or call us on 01788 577613 (Rugby) or 01908 564701 (Stony) and we’ll be happy to help.