Making Tax Digital (MTD)
Making Tax Digital – What you need to know
What is MTD?
From 1 April 2019 most VAT registered businesses with a taxable turnover* above the VAT threshold (£85,000) are required to keep their VAT business records digitally and send their VAT returns using MTD-compatible software.
The frequency of returns, and deadlines for submission and payments are not changing.
What does this mean?
Businesses will need to use software to keep their business records digitally. This may include dedicated record-keeping software or a combination of software packages and spreadsheets.
From April 2019, unless you’re a deferred entity, software which prepares a VAT return to send to HMRC must be MTD-compatible. This means that it can integrate with HMRC systems to send VAT returns to HMRC. From April 2020, data must be exchanged digitally between all software used by a business for VAT. The information contained within the MTD VAT return will be generated by pulling information from the digital records to populate the nine boxes required for the VAT return.
In the case of spreadsheets, this means that the software must be capable of taking the relevant information from the spreadsheet electronically and sending it to HMRC.
HMRC will not be offering its own software products, but will provide Application Programming Interfaces (APIs) for commercial software developers to develop a range of applications.
If you already use MTD software, Rickard Luckin are in contact with suppliers such as SAGE, Xero and Farmplan, and can keep you updated through our regular newsletters, which you can sign up to receive at www.rickardluckin.co.uk/subscribe
You do not need to keep any additional business records because of MTD. However, business records must be kept digitally to be compliant.
If you use spreadsheets, they must be able to submit the required data to HMRC digitally, for example, by using MTD-compatible bridging software.
Bridging software allows relevant data to be digitally exchanged from a spreadsheet or other source where the digital records are kept, directly to HMRC. The summary information must not be physically re-typed into another software package.
How this affects your business
HMRC announced in mid-October that the mandatory use of MTD will be deferred to 1 October 2019 for:
- ‘not for profit’ organisations that are not set up as a company
- VAT divisions
- VAT groups
- public sector entities required to provide additional information on their VAT return (Government departments, NHS Trusts)
- local authorities
- public corporations
- traders based overseas
- those required to make payments on account
- annual accounting scheme users
It is important to plan how you will keep your business records digitally. If you need advice or assistance in making this transition, please contact a member of the Rickard Luckin Tax team.
Keeping up to date
At Rickard Luckin, we work in partnership with our clients, taking time to understand their aims, ideas and plans so that we can best help achieve them. Not only that, but as we’re meeting more and more new businesses every week, it’s safe to say we’ve got our ears firmly to the ground regarding emerging trends, updated regulations and latest developments. This means we’re able to keep you updated on anything your business needs to know about, so you can keep focused on the day-to-day running of your operations.
Our regular Tax and VAT Newsletters distil news and need-to-know information into a single, easy-to-read update.
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