Making Tax Digital for VAT: Are you fully prepared for April’s changes?
11th March 2019 | Marc Chapman
Changes to VAT reporting kick in on 1st April. Here’s a quick checklist to ensure you’re fully prepared for the change, which is part of the Making Tax Digital (MTD) initiative.
- The change applies to all VAT-registered businesses whose turnover is above the current £85k VAT threshold.
- You must maintain digital records, and submit your VAT returns to HMRC through online accounting software. With some very limited exceptions, each and every transaction must be recorded electronically.
- Taking totals from paper records and recording these electronically does not meet the requirements of MTD and penalties could apply. You must keep a separate electronic record for each VAT supply made or received.
- The requirement to record each individual transaction digitally is separate and distinct from the requirement to submit information to HMRC.
- The submission requirement is for totals only, as HMRC will not be able to see whether each transaction has been digitally recorded separately. This means future compliance checks may start with a request for a digital download of your accounting records.
Should you be VAT-registered but with a current taxable turnover below the £85,000 threshold, you can continue to use the current online VAT return to file returns.
Changing to digital records
If you currently keep paper records or spreadsheets for your business and have yet to make a final choice of software, be aware of the following:
- Your VAT returns need to be filed using ‘functional compatible software’, so if you wish to continue using spreadsheets, you’ll need a bridging product from a commercial software provider to provide the necessary link between spreadsheets and the HMRC systems.
- HMRC will publish a list of approved software choices once the relevant software product is available to all. A list of providers for MTD (click here to see the list) was published when the pilot went public, but the range of providers is currently limited.
- Expect to have to pay for any updates or products you require, including bridging software.
- Given that spreadsheets are inherently more prone to error and do not provide a future-proofed solution, you may have to look for a full software solution at some point.
If you need help
Hudson Contract will always try to help answer any queries, but if you feel the new system may cause difficulties, the best port of call is your accountant, tax adviser or book-keeper.
To speak to one of our team, call us on 01262 401040
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