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Making Tax Digital

IMPORTANT FOR ALL VAT REGISTERED BUSINESSES ABOVE THE VAT THRESHOLD 

DO NOT IGNORE THIS!!! 

 Making Tax Digital (MTD) will fundamentally change the administration of the UK tax system. MTD will take effect in April 2019 and will only be mandatory at that time for VAT registered businesses over the VAT threshold. (Those who are registered but under the threshold will be able to continue as normal for now unless they exceed the threshold. 

PAPER RECORDS WILL NOT BE ADEQUATE. With limited exceptions taking totals from paper records and recording the totals electronically does NOT meet the requirements of MTD. A separate electronic records for each VAT supply made or received (multiple supplies on a single invoice may be acceptable). A relaxation is available for those on a retail scheme for daily amounts. 

  • INFORMATION TO BE SUBMITTED TO HMRC WILL BE THE SAME AS IT IS FOR NOW. The requirement to record each individual transaction digitally is separate and distinct from the requirement to submit information to HMRC. – the submission requirement is for totals only at present. 
  • IT WILL BE POSSIBLE TO USE SPREADSHEETS – BUT NOT STRAIGHT FORWARD. For record keeping and submitting information to HMRC a bridging product will have to be acquired from a commercial software supplier. It is expected these will become available. Some businesses who are on margin schemes may be able to use a suite of software and spreadsheets, but the links MUST be digital. 
  • IT IS UNLIKELY ANYONE WILL PROVIDE FREE SOFTWARE FOR THIS. Although HMRC have said there should be some, they are not developing it themselves. 
  • THOSE ON SPECIAL SCHEMES WILL STILL HAVE TO COMPLY. Even though a commercial software on its own may not be able to comply with the regulations, it is expected that between all the options, business will still be able to comply – even if adjustments to finalise the calculations are not made digitally, as the underlying records MUST still be kept as with any other business. 
  • MTD FOR INCOME TAX IS STILL EXPECTED TO GO AHEAD. Although HMRC have indicated that it will only be after the VAT system has been shown to work well. 
  • THERE IS NO REQUIREMENT TO SCAN OR KEEP ELECTRONIC COPIES OF DOCUMENTS. The regulations specify the information that is required to be kept electronically but copies of documents are not included in this list. The existing regulations include the requirement to keep copies of documents but these can be paper copies. 
  • FROM APRIL 2019 ALL VAT REGISTERED BUSINESSES WITH TURNOVER ABOVE THE VAT THRESHOLD WILL BE REQUIRED TO MAINTAIN DIGITAL RECORDS AND WILL NEED TO SEND THEIR VAT INFORMATION TO HMRC USING THIRD PARTY COMMERCIAL SOFTWARE. 

  

WHAT MUST BE KEPT DIGITALLY? 

HMRC has stated the following must be kept digitally:- 

  • Business name 
  • Address of principle place of business 
  • VAT registration number 
  • VAT schemes used 

 For each supply you make:- 

  • The time of supply 
  • Value of supply 
  • Rate of VAT charged 
  • A record of outputs value for the period split between standard, reduced, zero and exempt rates and also those outside the scope. 

 Multiple supplies at the same time do not need to be recorded separately. 

 For each supply you receive:- 

  • The time of supply 
  • Value of supply including any VAT that is not claimable by you 
  • The amount of input tax you will reclaim.  

 

VAT ACCOUNT 

The VAT account is the link between your business records and your VAT return. Under MTD for VAT, the information required to be held in the VAT account must be kept digitally and the information in that electronic account will be used by functional compatible software to calculate and fill in your VAT return. 

 DO YOU COMPLY? 

If you do already comply, then great, but do please keep in touch with us for more up to date news. Also, ensure as the date approaches, you check that your business can comply with the regulations from 2019. 

 If you suspect (or know) you do not comply please TAKE ACTION NOW! Next year will be too late. 

We are able to assist you in this matter and already have many clients on software that will be compatible when the due date arrives. It may not be as expensive as you think. We can look at all avenues to assist you to comply as soon as possible. Please do not leave it until the last minute. It is likely many businesses will do this and time may simply not allow if Accountants are inundated in April next year. 

 In the first instance contact one of the Directors or a member of staff if you require assistance. 

We would point out that HMRC are still finalising the finer points of MTD as are Software houses, so details may change between now and then. We cannot take any responsibility for the reliance up on the above information as it is for information purposes only.  

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