The Making Tax Digital (MTD) reforms represent a fundamental and unprecedented change to the UK tax system, which will ultimately impact all of us who are UK taxpayers.
We must be aware however that VAT is now at the forefront of their plans and If you are a VAT registered business then please note the way in which VAT accounting data will be required to be recorded and submitted to HMRC will change significantly.
So please, be aware, it is a requirement for all VAT-registered businesses with a turnover above £85,000 per annum to submit their VAT returns digitally, using MTD-compatible software, from April 2019. (This requirement applies to charities, schools, public bodies, sole traders and partnerships, and not just corporate bodies.)
MTD also means businesses will need to keep their records in a digital format which enables information to be provided to HMRC directly from their accounting system or via bridging software, through application programme interfaces (APIs) which can also receive information from HMRC.
If you, like many small businesses, keep your records on a spreadsheet you will need to have digital links, through MTD-compatible software, from the spreadsheet to HMRC.
If you use an accounting package but prepare your VAT return using a spreadsheet, from April 2019 the accounting package and the spreadsheet will need to be linked digitally.
With all these changes and the pressure on owner managers to get it right it is good to know that HMRC has confirmed that there will be a ‘soft landing’ period between April 2019 and March 2020, in which there will be no financial penalties for record-keeping failures. That’s a relief! There must, however, be a digital link between your accounting records and HMRC from the outset at 1 April 2019.
If you wish to get ready and would like advice, please get in touch with Charles Lucas or Kendal Blackburn. They would be delighted to chat through what is necessary for you and your business. Drop us an email via the contact page or phone the office direct – the number is at the top of the webpage.
Tom Bathgate MBA.