Making Tax Digital

Latest Update on Making Tax Digital (Feb 2018)

HMRC’s vision to digitalise the UK tax system is now well underway. The process is due to start in April 2019 with VAT registered businesses with turnover exceeding the VAT threshold (currently £85,000) being required to use commercial software to maintain their VAT records and send their VAT information to HMRC.

How to Prepare Your Business for Making Tax Digital

HMRC have released the following additional information providing some further clarification however this is still rather incomplete considering their stated launch date is less than 14 months away:

Start Date – It is expected that business will need to keep digital records and submit its VAT returns digitally with effect from the first VAT return period beginning on or after 1 April 2019.

Free Software – At this time it is not expected that there will be any free software for MTD for VAT.

Software Requirements – Whilst HMRC have confirmed that there will be no requirement for businesses to make and store invoices and receipts digitally the actual transactions will have to be kept digitally. This will include the following records:

About your business

  • Your business name
  • Address of your principal place of business
  • VAT registration number
  • Record of any VAT accounting schemes you use

For each supply you make    

  • Time of supply
  • Value of the supply
  • Rate of VAT charged

For each supply you receive

  • Time of supply
  • Amount of input tax you will claim
  • Value of the supply including any VAT that is not claimable by you

VAT Account – This is the link between your business records and your VAT return and must be completed without manual intervention using either an API enabled software package or bridging software.

If adjustments such as partial exemption calculations are required the calculation does not have to be made in the software but the total value of the adjustment must be recorded in the digital records prior to submission of the VAT return.

Penalties – HMRC are looking at a points based penalty system under MTD for VAT with penalties applying after a set number of late submissions the threshold of which will depend on whether you are submitting annual, quarterly or monthly returns.

They are also proposing a 12 month “soft-landing” period from the 2019 start date to allow businesses to upgrade systems so that links between software are digital.

Pilots – This is expected to start in April 2018 and in the first few months is only expected to include a few hundred businesses.

Many remain sceptical that HMRC will have the system fully in place by their stated deadline of 1 April 2019 and representations have been made by the professional bodies to HMRC to this effect as part of the ongoing consultation process. However, at present HMRC are standing firm with the existing timescale and the next few months will continue to be busy with further consultation taking place and additional clarification being issued.

Note

survey-buttonFor VAT registered businesses below the MTD threshold HMRC’s online portal will remain available for completion of VAT returns. However, they can voluntarily opt in to the MTD system of reporting if they wish.

At Moore Thompson we are here to help our client’s ensure they are as prepared as possible for the changes ahead both by keeping you up to date with the latest developments as released by HMRC, and the software providers, but also in providing you with new and improved online accountancy software and bookkeeping options through our MT Cloud Accounting options.

We will update this page as details of any new updates to MTD for VAT are announced.

At Moore Thompson we are taking a proactive approach to these changes to ensure businesses are prepared for the challenges ahead, by offering our expertise and experience with online accounting software.

We use a number of HMRC-approved online accountancy software products including QuickBooks, Xero and Sage, which are quick and easy to set-up and use – allowing you to take control of your finances on the move.

The clock is ticking…

These hugely significant changes to the way you report tax will be here before you know it, so it is important to get up to speed now and make the required changes in plenty of time.

At Moore Thompson we can take all the hassle out of making these changes and ensure that your business is ready for Making Tax Digital, so that you can focus on what is important – running your business and making it successful.

To find out how we can help you with Making Tax Digital, please contact our tax team now.

To find out more about our online accountancy services, please contact us.

Heather Bright BA (Hons), FCA, CTA

Partner