Making Tax Digital for VAT

Making Tax Digital (MTD) is HM Revenue & Customs’ (HMRC’s) strategy to modernise the tax system and will bring about mandatory digital record keeping and reporting by taxpayers.

MTD is required for any compulsory VAT registered entity, starting with the return for the first period commencing after 1 April 2019. If the entity is voluntarily registered for VAT they can opt in to MTD or continue to submit VAT returns as they are.

In October 2018, HMRC released a statement confirming that 3.5% of entities meeting the MTD requirements have now been given a 6 month extension. This 6 month deferral, until 1 October 2019, applies to VAT registered entities who fall into specific categories (including VAT groups).

What does MTD mean for those preparing VAT returns?

There will be two key requirements for relevant VAT registered businesses:

• To maintain digital records to provide a complete digital audit trail to support VAT returns; and
• To use MTD compatible software to report VAT data on a VAT return period basis and receive information from HMRC, using an HMRC Application Programming Interface (API).

If your accounting software will be MTD compliant, hopefully this transition will be a straight forward process. However, if Excel creeps into any part of your VAT calculation / submission work then you may need to make some changes sooner rather than later. My key message is to plan ahead!

Working with you – can we help?

We can carry out a review of your accounting systems and VAT return processes to identify any gaps between your current VAT compliance process and where it needs to be for MTD. We can work with you to implement changes to ensure your business is ready to submit its returns under MTD by April / October 2019.

I have been advising entities of all sizes (from small companies through to large corporate groups) about the MTD changes since early 2018 when the draft legislation was released. My team and I understand that every business is different. Using our knowledge and experience working with clients, we have been advising and implementing appropriate solutions that work now and are as future proof as possible.

For more informaiton, please contact Helen Bassett, helen.bassett@smithandwilliamson.com

Disclaimer

By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.