Making Tax Digital for VAT - Update
21st March 2018 by Robert Leggett
The government are in the process of ‘digitising’ various tax compliance processes and this has been dubbed ‘Making Tax Digital’ (MTD). VAT is the first tax to which this process will apply from April 2019, and the legislation surrounding this digitalisation is in the process of being issued.
What is required?
For VAT periods which begin after 1 April 2019 MTD for VAT will apply and businesses will be required to store accounting information digitally, using this information to complete their VAT returns.
Storage of information and the corresponding VAT returns will need to be prepared and processed through third party software.
Who will be affected?
Business that have a VAT taxable turnover over the registration threshold (currently £85,000) for a VAT period starting after 1 April 2019 will be affected.
Turnover should be checked at the end of each month, if the registration threshold has been exceeded in the 12 months prior, the business will be subject to the MTD provisions from the start of the following month.
Where the above test is met, MTD for VAT will apply thereafter, even if turnover subsequently falls below this figure.
There are exemptions to MTD, however these are minimal. For further details on the exemptions and what information you will need to store electronically please click here.
MTD for VAT is facilitated through third party software that talks to HMRC’s systems. This communicates with HMRC and will allow the storing of information and the preparation of the applicable returns in an approved format.
HMRC are not themselves providing software to assist, so those affected will need to purchase appropriate third party software.
What happens next?
HMRC aims to issue ‘final’ legislation before the start of the 2018/19 tax year and, from there, it will go through the usual approval process prior to receiving Royal Assent, that normally happens in the Summer.
However, given the delays to this process last year and the impending Brexit, you could be forgiven for thinking that timescale was a bit ambitious!
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