From the 1st April 2019, all VAT registered businesses, with a turnover of more than £85,000, will be obliged to keep digital VAT records, referred to as Making Tax Digital (MTD).
This is not optional, digital TAX record keeping will be mandatory. Business owners will no longer be able to log their VAT figures directly onto HMRC’s website. This will mean a big change for the vast majority of SME owners, of which 71% currently input their figures this way.
Digital records will be required for record keeping beginning on 1st April or thereafter. There are a number of business groups that will have a discretionary 6 month delay, allowing digital returns from 1st October, applied to their online VAT records - these include groups such as not for profits and trusts.
Tax returns will have to be sent to HMRC via MTD compatible software - popular accountancy software programmes, such as Quick Books, Sage, FreeAgent, Xero and Clearbooks have MTD software; many of which offer free trials. This compatible software will then upload your returns via the HMRC Application Programmes Interface (API).
Forecast and Prediction Tools
The implementation of the digital system is to make for easier, more efficient and effective record keeping. Such MTD software will include prediction tools, enabling businesses to make more accurate and informed forecasting, allowing them to realise the amounts of their VAT obligations in good time, negating any larger unforeseen VAT bills.
More information than previously required is now necessary. This means that the MTD information that you are required to supply digitally is as follows: business trading name, registered business address, VAT registration number, any VAT schemes, supply, time/tax point of supply, value - including net and rate of VAT charged, value of VAT to both reclaimed and non-reclaimable amounts.
What if My Turnover Dips Under £85k
Even if your turnover dips to under £85k during your tax year, you are still required to submit your tax returns digitally.
VAT Payment & Frequencies
The amount you pay, the frequency in which you pay and the number of returns you make will remain the same after MTD.
For a more comprehensive insight to Making Tax Digital requirements, additional information can be found on the HMRC website.