If you are a VAT-registered businesses with a taxable turnover above the VAT threshold (currently £85,000) you are required to keep your VAT records in a digital format and use Making Tax Digital compatible software to submit your vat returns from April 2019. This means that it can integrate with HMRC systems to send VAT returns.
The new rules apply from your first VAT period that begins on or after 1 April 2019.
From this date you will no longer be able to keep manual VAT records and in most cases spreadsheets will also not be a suitable option.
Make sure you have compatible software
If you already use software you need to make sure that you are on the latest version and that the software you use is compatible to submit VAT returns under Making Tax digital. You should contact your software provider in the first instance to confirm this.
If you do not have any software in place yet then you need to act now. There are many software options to choose from, please speak to us if you need advice on what may be suitable for your business. We can also assist you with bookkeeping services or software training.
If you currently use spreadsheets to keep business records you'll need MTD-compatible software so that you can send HMRC your quarterly VAT returns and receive information back from HMRC. Bridging software may be an option for some small businesses who do not have many transactions.
You will not be able to submit your VAT Return if you do not have compatible software in place when you sign up for Making Tax Digital.
Sign up for Making Tax Digital for VAT
Once you have your software in place you will need to sign up with HMRC for Making Tax Digital. To do this you will need:
- your Government Gateway user ID and password
- the VAT number of the business that you are signing up
Businesses that pay VAT by Direct Debit cannot sign up in the 15 working days leading up to, or the 5 working days after sending a VAT Return.
i.e if your first Vat quarter under the new rules is 1 April to 30 June 2019 and you submit your March 2019 vat return (last VAT return under the old rules) on the 7th May 2019, then your window for signing up will be between May 15th and July 16th (this assumes a 7th August submission date).
HMRC will send you a confirmation email within 72 hours of signing up. Do not submit a VAT Return until you receive the confirmation email.
Once you have signed up you will no longer be able to use the existing service to submit your returns. You will need to enable the MTD compatibility within your software and you must then send your VAT return directly from there.
We will automatically sign up businesses where we provide in house bookkeeping services. If you require any assistance with signing up please contact us and we can help you with this or we can do this on your behalf.
What records do I need to keep digitally for MTD?
MTD does not require you to keep any additional records for VAT, but to record them digitally.
Your digital records should include, for each supply, the time of supply (tax point), the value of the supply (net excluding VAT) and the rate of VAT charged.
They should also include information about your business, including business name and principle business address as well as your VAT Registration Number and details of any VAT accounting schemes you use.
Businesses who currently record daily totals can continue to do so, but they have to be captured digitally.
For each supply received it must include the time of supply (tax point), the value of the supply and the value of the input tax to be reclaimed.
If you require more information on Making Tax digital or require any assistance in preparing for the changes please do not hesitate to contact us.