You may have heard of HMRC’s upcoming initiative – Making Tax Digital (MTD). But what is it?
MTD for VAT is scheduled to kick-in in April 2019 however what does that mean for your business? Well, for you it means that your business VAT data need to be submitted to HMRC in digital format. The legislation stipulates that ‘functional compatible software’ must be used to both record and maintain the relevant VAT related data.
HMRC published draft legislation in December 2017 along with examples of how the business account records might link with the HMRC computer for compliance with MTD for VAT legislation.
What are Digital records?
Typically, the information provided is somewhat jargon heavy to the uninitiated:
‘Functional compatible software’ must be used to calculate VAT due, report VAT figures to HMRC, and to receive information back from HMRC…
What? Don’t worry, let us decode that into simple terms – in short, you should utilise software that is MTD compliant and can connect and communicate with HMRC’s systems – it’s that simple!
The impact means digitally recording VAT data for each sale and purchase made by the business includes the time of the supply, the value and the rate of VAT charged, or in the case of purchases, the amount of input VAT allowed. But be aware, there is no requirement in the draft regulations that the electronic capture of the data must happen at time of supply, or when the purchase is received, so long as the data is recorded electronically by the earliest date that the VAT return is due for submission, or is actually submitted.
Digital setup and audit trail
HMRC have not specified that a single instance of digital software must capture all digital records. However if using a disparate array of digital means, one must be linked digitally to the next, and therefore Marden & Co would suggest consolidating such processes wherever possible.
HMRC does provide examples of ‘digital linking’ in the draft notice. One example is a business which uses accounting software to record all sales and purchases, with the software then calculating the return and submitting it to HMRC. in addition the business also employs a spreadsheet to track company vehicles and road fuel charges. In this example the guidance suggests the spreadsheet data can be correlated to the accounting software through manual entry – not ideal, but at least an option.
Marden & Co are MTD ready and fully equipped to setup your processes for compliance with the legislation – we work with you to make sure that your accounting systems are ready before the new VAT rules start in 2019. Note that MTD for VAT will not be mandatory where turnover is below the VAT registration limit, currently £85,000 per annum.
These things have a habit of creeping up, so leave it to the last minute – get in touch with us today to discuss your requirements via email@example.com or by giving us a call on 01737 851 761
Alternatively our website to find out about the broad range of accounting and related services we offer www.mardenandco.co.uk/ or keep up-to-date with the latest news and legislation via our information packed blog www.mardenandco.co.uk/blog/