You may have seen MTD mentioned in the media and software providers may be contacting you to 'take action now!'
So what is MTD and what do we need to do?
MTD or Making Tax Digital is part of HMRC's push towards digital record keeping and one of the first steps in transforming the UK's tax system.
From 1 April 2019, VAT registered businesses whose taxable turnover exceeds the VAT registration threshold (currently £85,000), will be required to keep their records digitally and
submit their VAT returns to HMRC using a functional compatible software product that can access HMRC's API (Application Program Interfaces) platform.
If you currently prepare and submit your VAT return manually through HMRC's website portal, you should start looking at software providers to see which would benefit you and your business.
If you currently use spreadsheets to record transactions, the spreadsheets will need to be API enabled or used along with MTD compatible software.
HMRC have published a list of software providers which are now compliant under MTD or in the process of being compliant. If you do use accounting software, you should check with your software provider or HMRC that they will be ready for the April 2019 deadline.
If your VAT return staggers the 1 April 2019 deadline – perhaps your quarter end is 30 April 2019, your MTD staging date will be your next VAT return due; quarter end 31 July 2019.
There are some exemptions to MTD:
- If your taxable turnover is under the VAT threshold or you are voluntarily registered for VAT, you will not be required to file VAT returns under MTD; you can elect to file under MTD and can withdraw from MTD at a later date (should you still meet the requirements for exemption).
- If you or your business do not use computers for religious reasons, or are unable to comply because of age, disability or location (or for any another reason).
You must contact HMRC via the VAT helpline to obtain exemption.
- You are subject to an insolvency procedure; again you must contact HMRC via the VAT helpline to obtain exemption.
There is a six month deferral period for the following businesses, and so the deadline for MTD for VAT will be 1 October 2019:
- VAT groups and VAT divisions trading in the UK
- 'Not for profit' organisations that aren't set up as a company
- Local authorities
- Public sector entities required to provide additional information on their VAT returns
- Traders based overseas
- Annual accounting users
- Those required to make payments on account
From April 2020 it is expected that MTD will apply to income and corporation tax, however this is yet to be confirmed by HMRC and we wait for further details to be released. It may also impact all VAT registered business but again we are still waiting for further clarification from HMRC.
This article only summarises MTD and so we would urge you to contact us for further information. We can also help you in choosing the right software or we can help prepare your VAT returns.