“Making VAT Digital”
From 1st April 2019, you will be required to submit your VAT returns to HMRC using MTD compatible software.
This applies to all businesses (including charities and not-for-profit sector organisations) which
• are registered for VAT and
• have a taxable turnover above the VAT threshold (currently £85,000)
If you are not currently using MTD compatible software you must act immediately to ensure that you comply with these new rules.
How will this affect my business?
1. Filing of VAT returns
From 1st April 2019 HMRC require that you purchase and use MTD compatible software in order to submit your VAT returns. The HMRC portal will be removed and so software must be in place to enable you to submit your returns on time, avoiding penalties. HMRC will not be providing free software to customers.
2. Digital Record-Keeping
HMRC have stated that you do not need to keep any additional business records, they just need to be in digital format i.e. the software must record the time of supply (tax point), the value of the supply (net value excluding VAT) and rate of VAT charged. The business does not have to keep a digital image of each purchase invoice.
If you want to continue using spreadsheets, they must be able to communicate with HMRC via bridging software which must be purchased. The digital links in the spreadsheets must be in place by April 2020- you cannot cut and paste figures from one system to another.
HMRC is working with a number of software providers and are currently testing their software. Their website lists those suppliers who are currently in the test environment and these include Xero, Sage, Quickbooks and Free agent.
The software suppliers are also working on developing the “bridging” software required for linking spreadsheets to HMRC VAT return system. This software is currently hard find but is beginning to come onto the market.
What do I need to do?
i) Check with your current software supplier to ensure that the software you use to produce your VAT return figures will be MTD compatible by 1st April 2019.
ii) Digitise all parts of your record-keeping and ensure that the VAT return can be created from those digital records.
iii) If you do not currently have digital business records, you need to act now to ensure you are MTD for VAT compliant by 1st April 2019.
We will be contacting all our clients, in the very near future to discuss their requirements and how they can become compliant with the new MTD rules.