Making Tax Digital (MTD) for VAT – will you be ready?
Making Tax Digital for VAT launches on 1 April 2019. Accounting records for VAT return periods starting on or after that date will need to be held and filed digitally. This means accounting records held in spreadsheets or cashbooks will no longer be acceptable to HMRC.
When will you be affected?
PHASE 1 – VAT registered organisations only
Organisation that currently file a compulsory VAT return and have a taxable turnover above the current VAT registration threshold of £85,000, are the first to be affected. This will include landlords, sole traders, partnerships and limited companies.
VAT return periods commencing on or after the 1 April 2019 will need to be filed digitally. This means they will also have to be recorded digitally to create a full audit trail to support the VAT return.
PHASE 2 – VAT registered and non-registered organisations
Full details are not available yet, but this is likely to cover VAT registered business with taxable turnover less than £85,000 and non-VAT registered businesses.
What are your options?
Spreadsheets will not be compatible with HMRC’s systems and you will need to choose suitable software. The software must have a digital link to HMRC so you can submit VAT returns online.
We recommend using a recognised cloud accounting software package for your bookkeeping. This will enable you to meet HMRC’s requirements for digital records, keep your books up-to-date throughout the year, and it will also provide tools to support your decision-making process.
It is advisable to move to your new software now, so you are ready well before the April 2019 deadline.
The key to being ready for Making Tax Digital is preparation. Getting ready sooner rather than later will give you the chance to get used to using your chosen software before you have to submit your first return.