Although Making Tax Digital was mandated for the majority of UK VAT registered entities from April 1st 2019, some businesses are still unsure about what it’s all about. We take you back to the basics and answer some frequently asked questions.
Basics One – What is MTD?
Making Tax Digital was introduced this year for VAT as part of the Government’s plans to become one of the most digitally advanced tax administrations in the world. It means that VAT registered businesses will need to keep digital records and submit their VAT returns to HMRC with a digital link. Copy and paste, or manually typing the figures, into the return is no longer permitted. A digital link is necessary because MTD for VAT aims to recover some of the £9 billion lost to avoidable errors each year.
Basics Two – What does your business need to do for MTD?
VAT registered businesses should now be keeping digital records of their sales and purchases. Software, including Excel, can be used to hold these records. When the VAT Return is due, businesses must use software to transfer the information from the record-keeping system to HMRC, which maintains the digital link required by Making Tax Digital.
Basics Three – What records does your business need to keep for MTD?
Businesses should digitally record, for each supply, the tax point (time of supply), the value of the supply (net, excluding VAT), and the rate of VAT charged. Information about the business – including business name, principal address, VAT registration number, and information about any VAT accounting schemes used – should also be held digitally.
You can use Excel spreadsheets to record all of your information, then use MTDfVAT to provide the digital link to HMRC. MTDfVAT includes a pre-made VAT return template to make it easy for businesses to comply with MTD for VAT rules.
Basics Four – How often will your business need to send VAT returns?
There’s no change to the frequency of your VAT returns to HMRC. If a business submitted monthly using the old HMRC system, then their MTD for VAT returns will also need to be sent monthly. If a business submitted quarterly, then they will continue to send quarterly VAT returns.
Basics Five – What if your business’ turnover is under the VAT threshold?
Businesses under the VAT threshold are not required to sign up for MTD for VAT, but they can join voluntarily. If your turnover for the previous 12 month period exceeds the VAT threshold, you will need to sign up as MTD applies from the first day of the following month.
Ready to get started?
Find out more about MTDfVAT and sign up here.