You would be aware making tax digital (MTD) for VAT has become mandatory with effect from 1 April 2019. All businesses with a taxable turnover above the VAT registration threshold (currently £85,000) are now required to keep digital records and send HMRC VAT Returns using compatible software.
A short recap of the MTD requirements:
- VAT period: The MTD rules apply from your first VAT period starting on or after 1 April 2019.
- Digital record-keeping: Under MTD VAT records must be kept digitally within functional compatible software.
- Functional compatible software (FCS): FCS is a software program that must record and preserve digital records, be able to send returns/receive information to/from HMRC using the API platform. This includes most popular accounting packages. If you are unable to use an MTD compatible software package, you may wish to consider the use of “bridging software” which is a tool to link spreadsheets digitally to HMRC’s API platform.
- Digital links: Once data has been entered into the software that you use to keep and maintain digital records, any further transfer, recapture or modification of that data must be made using “digital links”. This means when using more than one program, each software should be digitally linked to one another (for example two software programmes “talk” to one another. Hard coded numbers and copy-pasted spreadsheets are examples of processes which would not be acceptable here).
- Soft landing period: The digital link requirement is not mandatory in the first year of MTD. HMRC will accept the use of ‘cut and paste’ or ‘copy and paste’ as being a digital link in the soft landing period only.
- Where you are allowed or required to adjust the input or output VAT under HMRC rules/schemes, the calculation of the adjustment does not have to be made in FCS. We understand that there will be a separate section of the HMRC portal for “adjustments”. It is only the total for each type of adjustment that is required to be kept in the FCS.
- How are you recording your data?
- Software- Has your software been upgraded to comply with the MTD requirements?
- Spreadsheets- Have you acquired MTD compliant bridging software?
- Are you using two or more programs? If yes, are they digitally linked (remember soft landing period applies)?
- Sign up for MTD for VAT
You will need to sign up for MTD at least one week before your VAT return is due. You can sign up your business here. You will need:
- your Government Gateway user ID and password
- the VAT number of the business that’s signing up
You will receive a confirmation from HMRC within 72 hours. After you’ve signed up, you cannot use VAT online services to send VAT Returns.
- Authorise your software
Before you can send VAT returns, you’ll need to authorise your software. This is usually done via a link from the software to HMRC.
We hope you find the above information helpful. If you have any questions, please do not hesitate to contact Elman Wall Tax Team at 020 7600 5667.