Making Tax Digital Factsheet

With 1 April 2019 fast approaching, if you have not yet started to prepare for MTD and the impact it will have on your accounting systems and VAT reporting, now is the time to do so.

Will MTD affect you?

  • For VAT registered businesses with turnover exceeding the VAT threshold (currently £85,000 per annum) MTD will need to be operated from your first VAT period starting after 1 April 2019. So, for example, if you have a quarterly VAT period ending on 30 June 2019 this will be the first time you will need to comply with MTD.
  • For VAT registered businesses with turnover below the VAT threshold (currently £85,000 per annum) MTD will not need to be operated yet. If you fall in this category, then there will not be any change in the way you submit your VAT returns. However, you will need to keep your level of turnover under review as if this exceeds the VAT threshold then you will need to start operating under MTD.
  • For non-VAT registered businesses MTD will not yet need to be operated.

For a small group of complex businesses including trusts, VAT groups, Traders based overseas, annual accounting scheme users and some not for profit organisations, MTD is deferred by 6 months to 1 October 2019.

What is MTD?

The key requirement of the system is that all businesses included in MTD must keep their accounts on an electronic accounting system that can talk to HMRC’s online systems.

The essential elements for businesses and organisations caught within the MTD Regulations for VAT purposes are:

  • Paper records will no longer be sufficient: Most VAT registered businesses will be required to use software or a spreadsheet to keep accounting records in order to submit their VAT returns. Paper accounting records will cease to meet the requirements of tax law. In addition, transactions should be entered individually. For retailers, this can be done on a daily basis rather than for each individual sale.
  • Returns and quarterly reporting: There will be a requirement to submit VAT returns to HMRC, directly from software or using some form of digital link.

When you need to comply

MTD is mandatory for VAT registered businesses with turnover exceeding the VAT threshold (currently £85,000 per annum) and will need to be operated from your first VAT period starting after 1 April 2019, as follows:

VAT return periods

First return within MTD

Quarterly VAT return periods ending:

 

· March, June, September, December

Q/E 30 June 2019

· April, July, October, January

Q/E 31 July 2019

· May, August, November, February

Q/E 31 August 2019

   

Monthly VAT return periods:

M/E 30 April 2019

What you need to do

  1. Ensure your accounting system is MTD compatible or you have procedures in place to enable you to submit your VAT returns in the required format. Please see our summary of accounting options which sets out the action required depending on your current accounting method.
  2. Register with HMRC for MTD filing in time to submit your first VAT return starting after 1 April 2019. Although early registration is possible, as soon as you have registered for MTD you will no longer be able to use the previous online VAT services.

We would therefore suggest waiting until you are mandatorily required to register under MTD. Any returns prior to your mandatory start date can then be submitted under your old system. HMRC should be contacting businesses direct to advise on how and when to register for MTD.

How can we help?

As your accountants we will support you through the changes being introduced by HMRC and provide the ongoing services that you need. However, the changes are so fundamental that it will be necessary to review your current record keeping systems and you may wish to consider what work you decide to do yourself and which activities you wish to include in the service we provide.

The arrival of MTD will be a big shake-up for many businesses. But it’s also an opportunity to tidy things up and get a fresh start. Done right, it could very well make your life easier. We are here to help, so please talk to us about how to make accounting simpler, more automated, and less of a headache.

We will continue to keep you informed. If you have any questions about MTD please do not hesitate to contact us.

Useful Links

https://www.gov.uk/government/publications/software-suppliers-supporting-making-tax-digital-for-vat/software-suppliers-supporting-making-tax-digital-for-vat

https://www.gov.uk/government/publications/vat-notice-70022-making-tax-digital-for-vat/vat-notice-70022-making-tax-digital-for-vat

https://www.gov.uk/government/publications/vat-notice-70045-how-to-correct-vat-errors-and-make-adjustments-or-claims/vat-notice-70045-how-to-correct-vat-errors-and-make-adjustments-or-claims

Making Tax Digital MTD Accounting Options for Clients
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