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Written by Andy Vessey ATT at Larsen Howie
As from 1st April 2019, Making Tax Digital (MTD) for VAT will swing into action.
This means that for all businesses that have an annual taxable turnover of over £85,000, ie taxable supplies that are either standard, reduced rate or zero rated, they will be compelled to keep their records digitally unless they are deferred for six months or exempt. They will also have to file their VAT returns using MTD-compatible software. Those businesses that have been part of the MTD pilot are already mandated to use the service from April 2019.
It is important to realise that VAT registered businesses are not automatically signed up to MTD and must therefore ensure that they enrol by visiting Sign up for MTD. HMRC will send a confirmation e-mail within 72 hours of signing up.
The timing of signing up is crucial, as signing up too early can create problems. Only VAT periods starting on or after 1st April 2019 are affected, so if a business signs up in March in the belief this is required in readiness for the changes, its March 2019 VAT return would have to be filed using MTD software and not via the HMRC portal.
For the majority of businesses that file VAT returns quarterly, their first MTD returns won’t be due until August 2019 or later.
For those businesses that already use accounting software or spreadsheets to maintain their VAT records, they may not notice a great deal of difference but they will need to ensure that their software is MTD-compatible.
The good news is that spreadsheets can continue to be used for the foreseeable future but ‘bridging software’ is likely to be required to make them MTD-compatible.
MTD does not require additional VAT records to be kept but rather for them to be recorded digitally. For both supplies made (sales) and received (expenses) the following data must be stored digitally:
Contractors using the flat rate scheme will not be required to keep digital records of supplies received unless they relate to capital items which cost most than £2,000 (including VAT).
Digital record keeping does not require businesses to scan and store invoices and receipts digitally, so businesses can continue to keep documents in paper form should they wish to do so but each transaction will need to be recorded and stored digitally.
See full article here to make sure you’re fully prepared for MTD for VAT.
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