Making Tax Digital for VAT – it’s almost time!

(c) metamorworks / Getty Images

(c) metamorworks / Getty Images - Credit: Getty Images/iStockphoto

The team at Cheltenham-based accountants and tax advisors Paish Tooth give their advice on Making Tax Digital (MTD) for VAT

Despite all the uncertainty surrounding Brexit, be aware that plans for Making Tax Digital (MTD) for VAT haven’t slowed down or gone away. The clock is still ticking to April 1, 2019 when MTD for VAT comes into force and businesses will have to change the way they submit VAT.

If your business is VAT registered, and your turnover is over the registration limit of £85,000, then you should already have received a letter from HMRC during the last quarter of 2018 telling you to prepare for MTD.

What information do I have to provide under MTD?

You’ll need to provide HMRC with exactly the same information as you do in the nine boxes of your current VAT return. The information is unchanged – it is the method of reporting which will differ. After April 1, 2019 the figures you enter must be submitted using MTD-compliant software via an API (Application Protocol Interface).

How will the software work to submit my VAT information?

If you already use cloud accounting software to submit your VAT return, the good news is that this process won’t need to change. If, however, you enter your figures by keying them directly into HMRC’s online portal (called the Gateway) then you will need to start using a piece of third-party software to submit your VAT return (N.B. HMRC is not going to produce its own software to enable businesses to file VAT returns under MTD).

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HMRC’s online portal will automatically close from April 1 for all businesses whose VAT returns show a turnover in excess of £85,000 covering the last year. It will, however, remain open for those businesses which are VAT registered, but which are not required to join the MTD scheme as their annual turnover is under the VAT threshold on March 31, 2019.

How will MTD affect VAT return filing dates?

For the time being at least, MTD will not affect your VAT return filing date. The deadline will still be one month and seven days after the end of your quarterly filing period. MTD for VAT will apply to all VAT return periods starting on or after April 1, 2019 and so the first monthly returns will relate to April 2019 and the first quarterly returns will relate to the quarter up until June 30, 2019.

What other information needs to be recorded under MTD?

If your business is VAT registered, then from April 1, 2019 you will also have to record the following information as part of your digital records:

• business name

• address of the principal place of business

• VAT registration number

• your VAT accounting scheme

You will also need to keep a digital record of all your sales and purchases, including the time of each transaction, the value of the supply and the amount of VAT applicable. This information can either be stored within your integrated online accounts software, or you can keep it on an Excel spreadsheet. If you do the latter, you must be able to automatically transfer the information into the same software which submits your MTD compliant VAT return.

Some software developers have been creating ‘bolt-on’ APIs, or bridging software, which will link directly to an Excel spreadsheet. In order for this to work, the spreadsheet will need to be kept in a precise format in order for the software to pick up the correct information, and so going forwards spreadsheets may prove a somewhat clunky and impractical option.

Opting-in to MTD for VAT

Be aware that MTD for VAT is an opt-in system – you won’t be signed up automatically! Whether you are mandated to join, or you do so voluntarily, you must actively opt in. Simply using compatible software to submit your returns will not be sufficient. Either you should sign yourself up, or your accountant can sign you up with your permission.

There are specific timings when you will need to register to file your VAT return via the new system. You should wait at least six days after your final non-MTD VAT return has been filed to sign up, but the latest date you can sign up is 48 hours before your first MTD VAT return is due (or 15 days before it’s due if you’re paying by direct debit).

MTD for VAT is a whole new digital system which is inevitably going to take some getting used to, for all parties concerned. It’s important to make sure that you’re as prepared as possible, so please do speak to the team at Paish Tooth if you have any questions or concerns and they will be happy to help.