The objective of the Making Tax Digital (MTD) project is to get businesses to record their accounting transactions digitally through accounting software and to use that software to report summary totals to HMRC each quarter. As VAT-registered businesses already submit VAT returns online, normally quarterly, the Government has decided that MTD reporting should start with VAT.
For periods beginning on and after 1 April 2019, VAT-registered businesses with turnover at or above the VAT registration threshold (£85,000), will be required to use accounting software to submit the figures reported on each VAT return to HMRC. This will mean a change in practice for most businesses, as 88% currently take figures from their spreadsheets or accounting system and type the amounts manually into HMRC’s web-based online VAT form.
Under MTD the VAT figures must flow directly from the accounting software, although it may be possible to have software that reads data from a spreadsheet.
Businesses who have voluntarily registered for VAT, as their turnover is under the VAT threshold, will not be required to enter the MTD reporting regime in April 2019. The MTD reporting will also be optional for those who are registered for VAT in the UK as non-resident traders and who have turnover under the VAT threshold. There may be particular issues to overcome for VAT groups who need to combine data from several companies to submit on one VAT return and for businesses who need to adjust their accounting figures to accommodate VAT rules such as for partial exemption, capital goods and margin schemes.
Let’s talk about how we can work together to crack this MTD nut. It will be a case of using the software that best suits your business circumstances.
