Making Tax Digital – VAT is a government initiative that sets out a bold vision for a digital tax system. It starts with the digitisation of the VAT system.
Are you prepared?
The government’s initiative Making Tax Digital (MTD) will come into effect from 1st April 2019 and will apply to VAT registered businesses and professionals.
What does MTD mean?
From April 2019 onward, VAT registered businesses and individuals with a taxable turnover above the VAT threshold (£85,000) will be obligated to keep digital records and send VAT returns using Making Tax Digital (MTD) Functional Compatible Software. And from April 2022, all VAT registered business, irrespective of turnover will need to follow the MTD rules.
What is changing for VAT?
VAT Returns will be compiled by pulling data from digital records. VAT Returns will be sent to HMRC via API-enabled products and not through the existing VAT Portal.
The Government have confirmed that they will not provide free software, and nor will you be able to use the existing online submission for your VAT for return periods commencing 1st April 2019 onwards.
Digital record keeping
Examples of data that must be recorded digitally include the following designatory data;
- Business name
- VAT registration number
- Record of VAT accounting schemes used
To remain compliant, Functional Compatible Software must be used. This means that there must be a digital link between software if a set of programs is used. Copying and pasting data from one place to another will not constitute a digital link. You will need to
- keep an audit trail between primary records and the VAT return
- keep information (date, amount, VAT, customer/supplier) about supplies made and received
preserve digital records in functional compatible software, for up to 6 years