HMRC VAT Notice 700/22, published 13 July 2018, provides detailed information about the changes in VAT from April this year, which amend the VAT Regulations 1995.
What is changing?
Using MTD compatible software to:
Keep digital records
prepare the VAT return
send and receive information to HMRC from API (Application Programming Interface) enabled software
Who is affected and when?
From April 2019
Most VAT Registered Businesses with turnover above the the VAT threshold (£85,000) from the first VAT period on or after 1st of April 2019. For example:
Return covers 1of March to 31 of May
Start MTD 1 June 2019
First MTD Return due 7 October 2019
MTD is voluntary for the VAT businesses £85,000
Businesses below the VAT threshold will not be affected but can use portal
Monthly check turnover previous 12 months
Once a business is mandated they stay in MTD even if the Taxable Turnover Drops below the threshold.
Already in place
“Not reasonably practicable”
Functional Compatible Software MTD compliant are QuickBooks, Xero, Sage but it also includes spreadsheets. Spreadsheets may however need bridging software that will enable electronic or digital transfer of data between software programs, products, or applications.
So, no more manual intervention or retyping information from one product to another. No copying and pasting.
Digital link does include XML import or export and macros and linked cells in spreadsheets.
What is the soft landing?
An extra year for businesses to arrange for digital links between parts of their software (April 2010)
To choose software
Speak to your existing provider
Seek advice from professional body
Have a look on GOV.UK
Internet search # MTD
Records that must be kept digitally
For each supply you make you must record the:
time of supply (tax point)
value of the supply (net value excluding VAT)
rate of VAT charged
For each supply you receive you must record the:
time of supply (tax point)
value of supply
amount of input tax that you will claim
To support each VAT Return you make, your functional compatible software must contain:
the total output tax you owe on sales
the total tax you owe on acquisitions from other EU member states
the total tax you are required to pay on behalf of your supplier under a reverse charge procedure
the total input tax you are entitled to claim on business purchases
the total input tax allowable on acquisitions from other EU member states
the total tax that needs to be paid or you are entitled to reclaim following a correction or error adjustment and
any other adjustment allowed or required by VAT rules
A total of each type of adjustment must be recorded as s separate line
Invoices must still be kept in paper or electronic form
By law must some records be in their original form
1 April 2019 – Making Tax Digital mandated for all customers (except for those that have been deferred)
October 2019 – Making Tax Digital mandated for customers that have been deferred
Spring 2019 – Pilot opens for customers that have been deferred
Getting ready – practical steps
Have a look at the timeline and think about your business
When can you join the pilot?
When are you mandated to start MTD?
How much work has to be done to be ready?
More information can be found on GOV.UK
Start to keep digital records
Making Tax Digital for Business – Your Tax Assistant
Read more Difficult Task of Making Tax Digital