Making Tax Digital (MTD) for VAT is a government initiative that went live in April 2019 for anyone over the VAT threshold of £85k turnover a year. In a nutshell, returns with a period starting after 1st April need to use software to submit their returns to a new government gateway, and will not be able to use the HMRC portal any more. They will also need to keep their accounting records digitally i.e. not on paper or spreadsheets.
This requirement to submit and keep records digitally (just known as MTD) is expected to roll out to more businesses from April 2020 onwards, and will drastically change the tax return system as we know it. The endgame is to have all businesses, no matter their size, submit a return each quarter instead of the annual Self Assessments of today, with additional returns at year end to finalise the figures. These drastic changes will have a huge impact on business owners. It could also mean that many businesses, that have not used an accountant before, may need to engage one for the first time in order to comply.
In our opinion the rollout of MTD for VAT has been a much bigger deal for businesses than the HMRC first thought, so it is likely that further rollouts to other businesses will be delayed. However – it would be prudent to look at software solutions – especially those on the cloud. A lot of them do make sense for most businesses outside of these changes to the tax regime, and guarantee to save most business and company owners considerable time. Both FreeAgent and Xero, along with other software providers, have MTD for VAT solutions in place.
More information on MTD is available for the HMRC website here.
We are keeping up to date with information as soon as it is being released by the HMRC, and will keep all of our clients as informed as possible. Please get in touch of you are VAT registered and need help getting ready and transferring to MTD for VAT. There is still time to get things sorted out as the first wave of VAT returns affected are due to be submitted by 7th August 2019.