Making Tax Digital
You may have heard about Making Tax Digital briefly or not at all. For many businesses this change will seriously impact the way they keep company records and submit VAT returns to HMRC. So in the video above we've gone ahead and explained what Making Tax Digital VAT will bring in April 2019.
What is Making Tax Digital?
Implied with the name 'Making Tax Digital', HMRC will be expecting businesses to keep their records on either a compatible software, or an Excel spreadsheet in order to directly submit VAT data online. This change will force businesses over the VAT registration threshold (currently £85,000) that keep paper records of their transactions to move onto a digital platform. If you are already keeping business records on compliant software with an accountant who's prepared for Making Tax Digital, there will be very little for you to worry about.
HMRC doesn't actually require a lot of information with the first stage of Making Tax Digital for VAT. The basics include your business information such as business name, principle place of trading address, VAT number and details of any VAT scheme your business is using. As for 'digital records' you'll need to include any supplies made and received. This involves the time of supply (tax point), net value, and finally the rate of VAT. With the right software, all of this can be done automatically so in theory this entire change should actually save you a lot of time.
Don't worry - if you have a legitimate reason why you can't comply with Making Tax Digital, contact the VAT helpline on 0300 200 3700 or write to them by post. You may be able to get an exemption from HMRC this way.
Valid reasons include:
- Remoteness of Location
When does MTD begin?
The official start date for Making Tax Digital VAT is 1st April 2019. However, that doesn't mean you'll just start submitting everything on or after 1st April in accordance with the new MTD rules. HMRC outlines that businesses will need to comply with Making Tax Digital for VAT from the first VAT period starting on or after 1st April 2019.
Let's say your VAT quarter runs 1st February 2019 to 30th April 2019. MTD rules will apply to your business from 1st May 2019, othwise known as the VAT quarter ending 31st July 2019. Your business will need to start keeping digital records from 1st May 2019 onwards even if its turnover dips below the VAT registration threshold.
More complex businesses do have a 6 month delay so they will need to comply from 1st October 2019. It's also been speculated that Making Tax Digital will be extended to all VAT registered businesses from 1st April 2020 along with other taxes like Self-Assessment and Corporation Tax.
How do I get compatible software?
Simply put, you'll have to buy software or subscribe to a monthly payment plan with most providers. Many offer free trials so our suggestion is to shop around and find one that works best for you. We recommend FreeAgent as it's very user friendly and keeps you updated on taxes along with the available profit in your business.
HMRC has an extensive list of compliant Making Tax Digital software providers: https://www.tax.service.gov.uk/making-tax-digital-software
Stuck? Our service is ready for making tax digital and already includes the best software.