Making Tax Digital for VAT What do you need to know?
There was a lot of speculation on the postponement of this in the Budget 18 however there was no announcement that HMRC are going to do that. So what does that mean?
If your business has a taxable turnover which exceeds the VAT registration threshold (currently 85,000), you are going to be captured by Making Tax Digital. You will need to comply with the new regime of MTD for VAT from 1st April 2019.
Great ok, so what are the actually practicalities of that?
MTD is all about HMRC changing its whole system. It wants to hold digital information from individuals and businesses and also to be able to transfer this information digitally between its departments which it doesn’t presently do.
MTD is the requirement to file quarterly digital information to HMRC this is going to start with VAT. So in practical terms the filing is staying the same, you will still need to file quarterly information and the same 9 boxes will need to be populated. Instead of taking the information and filling in the boxes on the HMRC site, you will be required to file and keep your records digitally using compatible software from the start of the accounting period.
This means it’s the end for manual records. Software or spreadsheets (or a combination) which can connect to HMRC via an Application Programming Interface (API) will need to be used. Figures from accounting software should not be re-keyed into another package (or spreadsheet), they need to be transferred digitally. There has to be a direct link.
So what exactly is the information which needs to be recorded digitally?
HMRC requires your digital record to include the following for each supply you make and receive:
- The time of supply (the tax point)
- The value of the supply (the net amount)
- The rate of VAT charged
- The amount of input tax you will claim
- Business name
- Principal business address
- VAT Registration number
- VAT accounting scheme used
We suggest you check with your current software provider that they are on the list of compatible software by HMRC, if you are using spreadsheets that will mean you need to find additional software to link the spreadsheet via the API platform therefore we would recommend starting to use software. We are Xero partners and recommend this to all our clients.
If you would like to know more about Xero software or if you are worried that your current record keeping for VAT does not comply, give us a call and we will be happy to help provide solutions to your needs.
