Why is HMRC introducing Making Tax Digital?
Making Tax Digital is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs.
HMRC’s ambition is to become one of the most digitally advanced tax administrations in the world. Making Tax Digital is making fundamental changes to the way the tax system works – transforming tax administration so that it is:
- more effective
- more efficient
- easier for taxpayers to get their tax right
When does MTD start?
01 April 2019, so any VAT returns submitted after this date will need to be in a digital form. So the quarter end date 30 April 19, all data from 01 February 19 to 30 April 19 returns will need to be in a digital form and submitted to HMRC.
Are there any exemptions?
Only a few. The exemptions cover those that that do not use computers for religious reasons and those that are unable to comply because of age, disability or location (or for any other reason).
My business is voluntarily registered for VAT do I have to submit my VAT returns digitally?
It is not mandatory to submit digital returns for voluntarily registered businesses under the £85,000 threshold. But if you opt to submit digitally then all future returns should be digital, you can’t reverse your decision.
Do accounting transaction details get submitted with my VAT return?
The answer is no. At least not at this stage, all that is submitted digitally to HMRC are the 9 entries on the VAT return.
Is excel classed as a digital record for VAT?
The answer is yes. HMRC’s initial stance was that excel would not be allowed but they have agreed to allow Excel.
Excel will be allowed as a form of digital record but you need to ensure that you have a method of submitting your VAT return to HRMC.
I still maintain some petty cash records in a hand-written book, will this be acceptable?
No. All accounting records should be recorded in a digital format.
Do I have to keep electronic copies of all invoices?
No, you don’t. As long as you have recorded a digital entry within your accounting software. Although there are many advantages of having electronic copies of your invoices.
I currently write up a handwritten book and then enter transactions on my software in one batch at the end of the month to save time. That’s ok isn’t it?
No, each individual transaction should be recorded as a separate transaction within your software under the MTD digital record guidelines.
My business is retail and I have a lot of cash takings, do I have to record every transaction digitally?
Retailers will be able to record gross daily takings (not weekly, monthly or quarterly) rather than each individual transaction. This means that there does not need to be a digital link between tills and the accounting records; recording the daily totals in the digital accounting records meets the requirements.
Will there be penalties if I don’t submit my VAT return digitally?
Yes there will be, although HMRC have communicated there will be a soft landing for 12 months.
MTD for VAT will start for VAT periods beginning on and after 1 April 2019, the new model of penalty points for late VAT returns will not be applied until 2020.
It is not clear whether the current VAT surcharge system will apply to VAT returns submitted under MTD within that “soft landing” period of 2019/20.
For more information please contact a member of our team
Our team are MTD pro adviser certified with Quickbooks.