Are you ready for MTD VAT returns?
The requirements for VAT returns will be changing from April 2019 when the Making Tax Digital regulation comes into force. If your business currently makes VAT returns or is likely to exceed the VAT threshold of £85,000 by that date, you will need to comply with the requirements for digital VAT returns.
What is a Making Tax Digital (MTD) VAT return?
As its name suggests, MTD relates to digital record keeping and VAT return submissions to HMRC. At the date of changeover, businesses will be required to use MTD functional compatible software for administering VAT records and for making their VAT returns.
What this means to you
In essence, this means that many businesses will need to build an entire computerised VAT administration system, as it’s still common practice for bookkeepers to manually administer company VAT records. Once this new legislation is fully in place, all companies will be required to use appropriate software for keeping VAT records and transferring this data over to digital VAT returns.
It will no longer be possible to make any manual VAT entries via the HMRC portal and nor will it be possible for businesses to transfer VAT data from their usual accounting software into spreadsheets for submission to HMRC using cut and paste techniques. At present it’s fairly common for manual VAT returns to be made, or for accountants to use a combination of spreadsheets and accounting package software records and simply cut and paste into spreadsheets for submission to the VAT office.
What will I need to do when MTD is live?
Once the new legislation is in place, businesses will be required to utilise functional compatible software to meet requirements. This will entail the purchase of a software programme with the ability to access the HMRC system by way of an application programming interface (API). Testing of some software has already taken place and HMRC has produced a guide to developers that have already been through their testing procedure. However, a finalised list of approved software is not yet available. Businesses that generally use spreadsheets for VAT returns will either need to use bridging software or API-enabled software. There will be a one-year bridging time frame for the MTD legislation to become embedded into normal company practice.
MTD VAT Returns – where to find out more
We can help regarding MTD VAT returns, please get in touch to discuss this with us or if you have any questions regarding MTD.
Image: Tax by Phillip licensed under Creative commons 6