If you are VAT registered with a turnover of over £85,000 you need to be aware of and start planning for MTD
What is MTD?
MTD is a government initiative that will require businesses and individuals to report ‘tax’ information to HMRC digitally on a regular basis (probably quarterly). The timetable in unclear but the first tax to be affected is VAT.
What are the implications of MTD for VAT?
Businesses that exceed the VAT threshold will need to keep specified digital records and submit their VAT returns digitally via an API connection (Application Programming Interface) Paper record keeping will no longer be acceptable, nor will it be possible to keep records on Excel (which is a digital record) and then manually enter the figures onto the HMRC Portal. The new regulations also require more detailed VAT record keeping than is currently required.
When is this happening?
HMRC have announced that 1 April 2019 is the start of the first VAT period where MTD for VAT is mandatory, although opinions on whether this deadline will be met vary. What is certain is that MTD for VAT is highly likely to be introduced in the near future.
What should I do to get ready?
The obvious answer is to switch to a computerised book keeping package that supports MTD. If you use Excel various companies are developing ‘bridging software’ that will provide an API interface. You will need to ensure that your underlying Excel record keeping meets the new requirements. Complex businesses that are required to make many VAT adjustments (e.g. partial exemption calculations, capital goods scheme) should be particularly careful that they choose a digital solution that meets their requirements.
Keep informed of HMRC’s plans – as the exact details of the implementation of MTD for VAT are still to be finalised.