Making Tax Digital for VAT
From April 2019 VAT registered businesses with turnover above the VAT threshold, currently £85,000, will be required to file their VAT returns digitally under Making Tax Digital (MTD).
MTD is the government’s scheme that requires online tax filing aswell as digital record keeping. All business taxes will be part of the scheme, but only VAT currently has an actual roll-out date with other taxes following in 2020 at the earliest.
While HMRC has not yet written to businesses about this change in VAT filing, MTD’s impact on small businesses is likely to be significant. The government says the scheme will reduce tax errors and generate extra revenue, in practice MTD mandates changes in record-keeping for small businesses with additional costs and, in our view, little benefit.
Please read our brief summary and the links below. If you would like to discuss the impact of MTD on your business, when MTD will apply and whether you need to change bookkeeping software then please let us know.
If you already file VAT returns using cloud software then it is likely that no changes will be necessary. If you currently use desktop packages such as VTT+, Sage or spreadsheets then you will no longer be able to complete the boxes manually online at HMRC to file your VAT returns.
We already use FreeAgent, Xero and Quickfile to file online VAT returns and recommend bridging software for users of VT Transaction+, such as Neilson James. Sage users are recommended to contact Sage directly for filing and pricing options.
A comprehensive list of software is below. HMRC will not be providing any software themselves.
Useful links:
VAT Notice 700/22: Making Tax Digital for VAT
Making Tax Digital for Business—Stakeholder Communications Pack
Software Suppliers Supporting Making Tax Digital for VAT
MTD – Brief Summary
From 1 April 2019, if you are a VAT-registered business with a taxable turnover above the VAT threshold, you will need to start following the MTD rules from the first day of your first VAT period that starts on or after 1st April 2019.
After this date you will no longer be able to manually complete the nine boxes of your VAT return online at the HMRC VAT portal.
Instead you will need to:
(a) Keep and preserve your VAT records digitally;
(b) Send VAT returns to HMRC using MTD-compatible software
MTD for VAT does not alter deadlines, nor existing VAT filing periods.
You’re still required to provide the same nine boxes of information. You’re just required to do so digitally, via your MTD-compatible software, based on the digital records you’ve been keeping and preserving.
From 1 April 2019, HMRC is offering a 12-month long “soft landing” during which they say it will be acceptable to copy and paste data from a spreadsheet. If you use more than one software package, at least one of them must be able to record and preserve digital records for the purposes of VAT.
VAT Notice 700/22 sets out what VAT records must be kept digitally, which for most businesses includes your business name, the address of your principal place of business, your VAT registration number and details of any VAT accounting schemes that you use. Most businesses will also need to record, for each invoice (or “supply” in the VAT Notice terminology), the time and date of supply (tax point date), the net value (excluding any VAT) and the VAT rate used to calculate VAT.
An application programming interface (API) is the technical term describing how one software package connects to another to transfer data. HMRC use the term to describe the way software packages connect to their systems for the purposes of MTD. All MTD-compatible software will utilise HMRC’s API.
To try and reduce the impact of MTD for VAT as much as possible, HMRC allows the use of bridging software whose purpose is solely to connect to HMRC in order to send VAT information. The idea is that bridging software can do the heavy lifting work for non-MTD-enabled software, so that businesses or accountants can continue working in the way they do. It’s even possible to use a bridging solution to send VAT returns to HMRC from a spreadsheet.
We recommend bridging software for businesses currently using desktop software such as VTT+.
From April 2019 VAT registered businesses with turnover above the VAT threshold, currently £85,000, will be required to file their VAT returns digitally under Making Tax Digital (MTD).
MTD is the government’s scheme that requires online tax filing aswell as digital record keeping. All business taxes will be part of the scheme, but only VAT currently has an actual roll-out date with other taxes following in 2020 at the earliest.
While HMRC has not yet written to businesses about this change in VAT filing, MTD’s impact on small businesses is likely to be significant. The government says the scheme will reduce tax errors and generate extra revenue, in practice MTD mandates changes in record-keeping for small businesses with additional costs and, in our view, little benefit.
Please read our brief summary and the links below. If you would like to discuss the impact of MTD on your business, when MTD will apply and whether you need to change bookkeeping software then please let us know.
If you already file VAT returns using cloud software then it is likely that no changes will be necessary. If you currently use desktop packages such as VTT+, Sage or spreadsheets then you will no longer be able to complete the boxes manually online at HMRC to file your VAT returns.
We already use FreeAgent, Xero and Quickfile to file online VAT returns and recommend bridging software for users of VT Transaction+, such as Neilson James. Sage users are recommended to contact Sage directly for filing and pricing options.
A comprehensive list of software is below. HMRC will not be providing any software themselves.
Useful links:
VAT Notice 700/22: Making Tax Digital for VAT
Making Tax Digital for Business—Stakeholder Communications Pack
Software Suppliers Supporting Making Tax Digital for VAT
MTD – Brief Summary
From 1 April 2019, if you are a VAT-registered business with a taxable turnover above the VAT threshold, you will need to start following the MTD rules from the first day of your first VAT period that starts on or after 1st April 2019.
After this date you will no longer be able to manually complete the nine boxes of your VAT return online at the HMRC VAT portal.
Instead you will need to:
(a) Keep and preserve your VAT records digitally;
(b) Send VAT returns to HMRC using MTD-compatible software
MTD for VAT does not alter deadlines, nor existing VAT filing periods.
You’re still required to provide the same nine boxes of information. You’re just required to do so digitally, via your MTD-compatible software, based on the digital records you’ve been keeping and preserving.
From 1 April 2019, HMRC is offering a 12-month long “soft landing” during which they say it will be acceptable to copy and paste data from a spreadsheet. If you use more than one software package, at least one of them must be able to record and preserve digital records for the purposes of VAT.
VAT Notice 700/22 sets out what VAT records must be kept digitally, which for most businesses includes your business name, the address of your principal place of business, your VAT registration number and details of any VAT accounting schemes that you use. Most businesses will also need to record, for each invoice (or “supply” in the VAT Notice terminology), the time and date of supply (tax point date), the net value (excluding any VAT) and the VAT rate used to calculate VAT.
An application programming interface (API) is the technical term describing how one software package connects to another to transfer data. HMRC use the term to describe the way software packages connect to their systems for the purposes of MTD. All MTD-compatible software will utilise HMRC’s API.
To try and reduce the impact of MTD for VAT as much as possible, HMRC allows the use of bridging software whose purpose is solely to connect to HMRC in order to send VAT information. The idea is that bridging software can do the heavy lifting work for non-MTD-enabled software, so that businesses or accountants can continue working in the way they do. It’s even possible to use a bridging solution to send VAT returns to HMRC from a spreadsheet.
We recommend bridging software for businesses currently using desktop software such as VTT+.