Making Tax Digital for VAT was mandated on 1st April 2019 for most UK VAT-registered businesses, and the soft-landing period ends this April, after which HMRC will begin penalising those not adhering to the new rules. Many businesses are yet to sign up, perhaps due to confusion over what MTD is and what they need to do.
1. INTRODUCTION
Making Tax Digital for VAT (MTD for VAT) was introduced in 2019 as part of the Government’s plans to become one of the most digitally advanced tax administrations in the world. MTD means that VAT registered businesses will need to maintain digital records and submit their VAT returns to HMRC with a digital link. Copy or cut and paste, or manually typing the figures into the return, is no longer permitted. A digital link is necessary because MTD for VAT aims to reduce some of the £9 billion lost each year to avoidable errors created with a manual process.
2. ACTION
VAT registered businesses with turnover over the taxable threshold should now be keeping digital records of their sales and purchases. Software, including Excel, can be used to hold these records. When the VAT return is due, businesses must use software – like BTCHub – to transfer the information from the record-keeping system to HMRC, which maintains the digital link required by Making Tax Digital.
3. RESPONSIBILITIES
Businesses should now be recording digitally, for each supply, the tax point (time of supply), the value to the supply (net, excluding VAT), and the rate of VAT charged. Information about the business – including business name, principal address, VAT registration number, and information about any VAT accounting schemes used – should also be held digitally.
You can use Excel spreadsheets to record all of your business and VAT information digitally, then use BTCHub to provide the digital link to HMRC. BTCHub includes a pre-designed VAT return template to make it simple for businesses to comply with MTD for VAT rules.
4. FREQUENCY
There’s no change to the frequency of your VAT returns to HMRC. If your businesses previously submitted monthly using the old HMRC system, then your MTD for VAT returns will also need to be sent monthly. If you submitted quarterly, then you will continue to send quarterly returns. The submission and payment dates do not change under Making Tax Digital.
5. THREASHOLDS
Businesses under the VAT threshold are not required to sign up for MTD for VAT, but they can join voluntarily. If your turnover for the previous 12-month period exceeds the VAT threshold, then you will need to sign up as MTD applies from the first day of the following month.
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