Making tax digital for VAT registered businesses
May 3, 2018
Making Tax Digital (MTD) will transform the way tax is administered.
From 1 April 2019, VAT registered businesses with turnover exceeding the VAT threshold of £85,000 should record all transactions digitally using MTD compatible software. You will no longer be able to submit your VAT Returns through the VAT portal; instead they will be submitted to HMRC through their Application Programming Interface (API) via your software, bridging software or API enabled spreadsheets. You must also be able to receive information from HMRC using the API.
From April 2019, if you reach the VAT registration threshold, MTD will also apply from the date of your VAT registration. If, however, your turnover falls below the VAT threshold, MTD must continue. Once you’re in, you’re in!
Although not legislated for, it is intended that there will be a ‘soft landing period’ whereby HMRC will not charge penalties for incorrect digital record keeping and data transfer. It is thought that HMRC may accept some data being transferred manually for one year but the submission of the VAT return must be completed via API.
Businesses undergoing formal insolvency procedures, those run by religious societies whose beliefs are not compatible with electronic communication as well as the ‘digitally excluded’ (i.e. by age, disability or remoteness of location) will be exempt from MTD for VAT.
It is intended that MTD for Income Tax and Corporation Tax will apply from April 2020.
MTD is not changing what you do; it’s how you do it. Please call Alex or Chloe at CKLG on 01223 810100 if you need help transitioning your manual bookkeeping into digital form or assistance in determining if your software is compatible with MTD.