The deadline is looming for changes to how small businesses will be required to file VAT returns.
From April 1, VAT-registered businesses with a turnover exceeding £85,000 will be required to file VAT returns digitally.
The current HMRC portal which many use will no longer exist, to be replaced by the requirement to send VAT returns to HMRC using MTD-compatible software.
Businesses will also be required to keep digital VAT records.
Are you ready for Making Tax Digital?
- HMRC says Making Tax Digital (MTD) will be mandatory to businesses registered for VAT and with a turnover of currently £85,000 from April 1, 2019.
- Even if your taxable turnover drops below the VAT registration threshold you are still required to continue to keep digital records and send your returns using the new software.
- Businesses with a taxable turnover below the VAT threshold can sign up for MTD for VAT if they wish but the requirement to comply with MTD doesn’t apply if you de-register from VAT or you are exempt from MTD for VAT.
- Trusts, not for profit organisations, VAT divisions, VAT groups and traders based overseas have until October 1, 2019 to start keeping digital VAT records and use MTD-compatible software to send in their VAT returns.
- Bridging software, a tool to extract information from a spreadsheet or in-house record keeping system, may be needed to make spreadsheets MTD-compatible. There is no requirement to keep additional records, just record them digitally.
What information does a business need to keep digitally?
Digital records need to include:
- The time of supply
- The value of the supply
- The rate of VAT charge
- Information about your business including name, address, VAT registration number
Businesses have until March 31, 2020 to ensure they have digital links between software products.
MTD is here to stay as the Government strives for greater transparency in the tax system to improve tax collection and detecting tax evasion.
Get help now if you are unsure if your systems are MTD compliant.