In 2015 UK Government had a vision for the “end of the tax return” and a “transformed tax system” by 2020. HMRC states that it’s main goal of MTD is to make tax administration more effective. HMRC’s Tax Gap figures suggest that £8billion of the tax lost per year as a result of avoidable taxpayer errors.
The Making Tax Digital Timeline
• Originally – April 2018
• Now – 2021 at the earliest
• Originally – April 2020
• Now – 2021 at the earliest
• Originally April 2019 for all VAT registered businesses.
• Now – Compulsory Registrations = 1st April 2019/ 1st October 2019
• Now – others 2021 at the earliest
Who is affected now?
All businesses with taxable turnover above the VAT registration of £85,000 is affected from 1st April 2019. There are some businesses that have a deferment date of 1st October 2019, of our clients these are the Annual Accounting Schemes.
What about Voluntarily registered businesses – Good news, you are not required to enroll but can voluntarily sign up. However, taxable turnover must be checked monthly to ensure that the business does not exceed the registration threshold. If it does, the business must enroll for MTD from the start of the next VAT period.
What am I required to do?
A business must keep digital records in functional compatible software. We currently offer support for Quickbooks, Kashflow, and Xero.
The VAT return must be filed through API-enabled software and maintain “digital links” between separate pieces of software.
What digital records are required?
Digital records must include the Business name, principal business address, VAT registration number and any VAT accounting scheme used.
For each supply made and received, there must be a digital record of the tax point ie the date of the invoice, net value and the rate of VAT charged or reclaimed.
If using software already, you are already doing this. We just need to file the return through the software. If using Excel, there will be bridging software available to be able to file the VAT return and use the digital link.
What will HMRC see when I file my VAT return through software using the digital link?
At present, they will just receive the box 1-9 information that is currently keyed into a VAT return on your HMRC Business Tax Account.
The intention for the future is to be able to see all the data relating to the boxes but as yet this data will not be transmitted to HMRC. All that is required is the digital link.
What do I need to do?
The first VAT quarter that is affected will be 1st April – 30th June 2019 to be filed and paid by 7th August.
Aldous & Saunders will contact you to let you know what to do, if anything. Otherwise, we will continue as normal and file the VAT using the digital link that HMRC requires.
If you are Voluntarily registered, we will enrol you for MTD to keep things running smoothly our end, and so that there is minimal risk of missing if you do hit the VAT registration threshold of £85,000.