Making Tax Digital (“MTD”) for VAT came into force on 1 April 2019. As a result of these provisions, it is now mandatory for all VAT registered businesses with a taxable turnover above the registration threshold (currently £85,000) to keep digital records and submit their VAT returns quarterly through HMRC-approved software, using an application programming interface (API).
The previous method of submission via the HMRC portal is now unavailable. There are very limited circumstances for HMRC to approve any opt out.
In addition to the above digital submission requirement, certain data must be recorded digitally within ‘functional compatible software’ (FCS). The FCS can be a software program or a set of software programs (including spreadsheets provided certain conditions are met) that must be capable of:
- Holding all the mandatory digital data as required under MTD;
- Submitting the nine VAT return figures to HMRC for the MTD specific API;
- Receiving information from HMRC via the API;
- Transferring data between software programs via a ‘digital link’.
Who will be impacted first?
- April 2019 – All businesses above the VAT threshold (£85,000) will be required to keep digital records and file their VAT returns using MTD compliant software.
- April 2020 – The timings for MTD for corporation tax have yet to be confirmed but it will not become mandatory before April 2020.
- 2020 – All those who complete self-assessment tax returns – self-employed, partnerships, trusts and landlords – don’t yet have a set date for mandatory income digital tax reporting.
As this affects all VAT returns for VAT periods starting on or after 1 April 2019 (October 2019 for deferred business), individuals and businesses need to be following the new process.
How we can help with Making Tax Digital for VAT
- Help support you via our free technical material to learn more about MTD for VAT
- Check if your accounting software is MTD ready and on HMRC’s “approved” list
- Complete a VAT review to ensure you are MTD compliant
- Provide in-person training to your Tax team
- Help you get ahead of the curve – other taxes are planned to go digital in 2020