As of the 1st April 2019, businesses who have registered for VAT will have to keep their VAT records digitally, and automatically submit their VAT returns to HMRC by using digital software. The scheme is called Making Tax Digital (MTD) and it will affect most businesses from April 2019 with further changes expected in 2020.
Making Tax Digital Webinar with HMRC
On 13th February 2019, we hosted a webinar alongside Verna Gellvear, who is HMRC’s MTD Customer Readiness representative. View the video above or watch on Youtube.
The webinar slides are now available to download here.
Need help getting to grips with Making Tax Digital?
Now you know what Making Tax Digital is, you might need someone to help you take care of your responsibilities. That’s where we come in. We’ve been working with HMRC to make sure our cloud accounting software is MTD ready. Our clients are now completely prepared for April’s changes – are you? Check out the link below and find out how Crunch can make your accounting easier.
If you’re looking for more information on Making Tax Digital, check out the helpful resources below.
If you have any further questions, don’t hesitate to contact us.
Making Tax Digital Q&A with Lenny Barry from HMRC
Lenny Barry answered some questions from our webinar audience.
What if I’m not above the VAT threshold?
If you are VAT registered voluntarily – ie below £85k threshold – there is no mandatory MTD requirement (though if you become a Crunch client then Crunch will register you for MTD even if you are voluntarily registered).
You do need to monitor your turnover as it is rolling 12 months or within 30 day period. As soon as you know you are over the threshold – have to submit using MTD within 30 days.
If you are VAT registered and above the threshold – you have to submit.
If you’re not VAT registered, you have more time.
Do you know what your estimated turnover is? If not maybe you should use software that gives you a clear picture of your finances
What happens if I’m not ready?
There are no loopholes – everyone who is VAT registered and above threshold has to do it via MTD. You may face penalties if you don’t.
They are taking away the ability to use the old system.
There are no transitional arrangements – though there is a soft landing period for links to other financial software, but not for your VAT filing
What records do I need to keep digitally?
- Business name
- Address of your principal place of business
- VAT registration number
- A record of any VAT accounting schemes used
For each supply you make:
- The time of supply
- The value of the supply
- The rate of VAT charged
For each supply you receive:
- The time of supply
- The value of the supply including any VAT that isn’t claimable
- The amount of input tax that you will claim
Your VAT account, including:
- The output tax due on sales
- The output tax due on acquisitions from other EU member states
- The tax payable on behalf of your supplier under a reverse charge procedure
- The tax that needs to be paid following a correction or error adjustment
- The input tax claimable from business purchases
- The input tax allowable on acquisitions from other EU member states
- The tax reclaimable following a correction or error adjustment
- Any other necessary adjustment required by VAT rules.
When do I need to start keeping digital records?
Digital records will be required to be kept from 1st April 2019.
When do I need to have software in place?
Digital records are required to be in place from 1st April 2019. It would be ideal, perhaps, to have accounting software in place at the same time.
However, it may be that some businesses may not have software in place at the outset and, theoretically, it could be possible to ensure that digital records are in place, and these could be fed into the software when it becomes available. It would certainly need to be in place to enable the first VAT return commencing after 1st April 2019 to be able to be filed under MTD.
When and how can we register for MTD?
The MTD service is effectively open for business now. Businesses can sign up for MTD via the GOV.UK website.
Businesses who have an agent should discuss with their agent and ensure that actions are aligned. Businesses should only be signed up when they are ready, i.e. they have digital records and MTD compatible software.
Our invoices, once generated are held in PDF format on our Cloud. Is this OK?
This sounds fine. The invoices are digital in PDF. Presumably, they are easily identifiable and retrievable, and the data in the invoices is already captured and used to collate the VAT return.
I’m still using accounts ledgers and paper receipts…does that mean I have to change my whole accounting system?
If a business has a taxable turnover above £85,000 then they are required to submit their VAT returns under MTD. This would require the business to have digital records and submit via MTD enabled software, which could include spreadsheets with a digital link.
Paper invoices would remain valid, but if all the information is in the digital records they would not need to be scanned/kept.
We generate invoices in an Excel application and upload to SAGE (MTD compliant). Is this OK?
Presuming this means “at the push of a button” and no manual intervention, this would be fine.
What about digital links, when do they need to be in place? We have a complex process and several parts will need doing…
HMRC accepts that many businesses will have multiple, and complex, components to their software or spreadsheets in order to automate their VAT return. As such VAT Notice 700/22 provides for what is referred to as a “soft landing period”. This provides businesses with a twelve month period, up until 31 March 2020, to have all the digital links in the process in place.
Digital records are still required from 1st April 2019, and we would recommend businesses putting in their digital links at the earliest opportunity.
If my next quarterly tax period is Mar-Apr-May, do my digital records start from April or from June?
Mar-Apr-May return is not required to be filed under MTD. Ideally, businesses should have digital records from 1st April but we recognise that this may cause issues, for some, mid VAT period. Businesses must have digital records in place to be able to submit an MTD VAT return.
Does digital record keeping go so far as having to keep a digital copy/picture of receipts even if they are entered into accounting software?
If all the required information is held within the accounting software then there would be no need to keep copies.
Do we need to scan and store images of purchase invoices and expense receipts on our MTD compliant system?
If the required information is held within accounting software there is no need to keep further copies. If you choose/need to keep copies these can be paper or digital.
How can I digitise my income from till purchases?
Presumably, this is in a retail environment? And the business is using an existing Retail Scheme that enables the use of Daily Gross Takings, usually from a “z” reading of the till at the end of the day?
As now, the “z” readings would be the DGT and recorded in either accounting software or a spreadsheet, which would create the digital record.