Making Tax Digital (MTD) For VAT
Making Tax Digital (MTD) is a HMRC scheme aiming to make the tax system more efficient and easier for taxpayers to manage their affairs. Errors in tax returns cost the Exchequer in excess of £9 billion a year as shown by the recent tax gap estimates. The aim is that digital records, sent directly to HMRC, will improve accuracy and reduce the number of mistakes made. It will affect all UK businesses irrespective of their size, so it is important to be aware of the deadlines. Initially, the focus will be on MTD for VAT, however there are currently pilot studies going on for income tax too, where self-employed businesses and landlords are using software to keep digital records and send income tax updates to HMRC instead of filing a self-assessment form.
Mandatory MTD For VAT
As stated, the first phase of MTD for businesses begins on 1st April 2019 with the mandatory MTD for VAT. Businesses registered for VAT with a taxable turnover above £85,000 will be required to keep digital records of VAT transactions and use MTD compatible software to submit VAT tax returns. This will start from their first VAT period starting on or after 1st April 2019. There are some businesses which are exempt from the April deadline. These include trusts, ‘not for profit’ organisations that are not set up as a company, VAT divisions, VAT groups, public sector entities required to provide additional information on their VAT return, local authorities, public corporations, traders based overseas, those required to make payments on account and annual accounting scheme users. For these companies there is a 6-month deferral period and they will not be required to be on the MTD scheme until October 2019. However, it is recommended that these companies start to keep their VAT records digitally in preparation for the change.
Need a VAT calculator? Check out our article “Step-by-step tutorial: how to use a VAT calculator like a pro!”.
For businesses with a turnover less than the threshold, MTD is not compulsory, but they can choose to opt in voluntarily. We would recommend considering this as it is a more efficient way to file tax returns and keep track of your finances.
The VAT notice 700/22 states what digital records businesses need to keep and also what software is classified as compatible.
Not sure how to reclaim VAT? Click that link to our article to find out more!
Software For Making Tax Digital
At Sleek, we are highly accustomed to using HMRC MTD compatible software such as Xero and Quickbooks. For clients already using these platforms to keep records and submit their VAT tax returns, nothing needs to be done. However, if you are not yet submitting your VAT tax return electronically, get in touch and we would be happy to help you get set up and running in time for the April deadline.
All of our advisers are Quickbooks and Xero certified and can provide ongoing support to ensure you become familiar with the shift to digital.
Dealing with value-added tax can be a hassle. Focus on growing your business while we handle your quarterly VAT returns. Sleek’s VAT accounting services are fast and easy to use. Learn more today.
