Making Tax Digital
The new making tax digital (MTD) requirements, which take effect from 1st April 2019, apply to all VAT registered businesses trading taxable supplies above the VAT threshold of £85,000. (taxable supplies are goods sold zero rated, reduced rated and standard rated. Exempt and outside the scope supplies do not count towards the threshold). Any businesses which has voluntarily registered for VAT and does not currently trade taxable supplies over £85,000 in a rolling 12-month period does not have to currently comply with MTD.
Three key requirements of MTD:
· Digital retention of records
· Digital links between accounting records
· Digital submission of VAT return
1. Digital retention of records
Each transaction must be listed and retained digitally
Retailers will be required to enter daily transactional records (i.e. total daily gross takings taken from the till) but there is no requirement for EPOS tills to be linked to the digital bookkeeping records
Manual records only will be illegal
Cash accounting is permissible
Excel spreadsheets are classed as digital records
2. Digital links between accounting records
Requirement for data to flow from various points to one central point for submission digitally (no manual intervention). Particualry relevant for those business with one VAT registration/submission but difference business divisions on different accounting systems (i.e. farm division, tourism division, retail division etc)
Postponed for 12 months (not imposed until after April 2020).
3. Digital submission of VAT return
VAT returns must be submitted to HMRC digitally with no manual intervention
This will be done directly from software packages or digital records using an Application Program Interface (API)
HMRC have published a list of API programs which fit with the HMRC website
Submission deadline remains as one month and 7 days post end of VAT period
What date is your business mandated to MTD?
The date any business is required to comply with MTD is the first VAT period beginning after 31st March 2019. Businesses with monthly returns this date would be 1st April 2019, for quarterly returns it would be the next quarter end (April, May or June 2019). HMRC believe this will apply to 96.5% of businesses.