MTD - What You Need To Know
Making Tax Digital (MTD) for VAT is now here and came into effect as of 1 April 2019. Any business that is VAT registered with a turnover greater than the VAT registration threshold (currently £85,000), will be required to submit VAT returns digitally via an MTD compliant software, or a bridging software with a digital link, provided it is compatible with HMRC’s portal. This affects VAT returns for periods starting on or after 1 April 2019, after which the business will not be able to access the HMRC online service to submit VAT returns.
Here’s our summary to help you make sure you know the requirements, particularly if you are filing your own VAT returns.
Make sure you have an MTD compliant system in place
We recommend that you get to know the requirements of MTD (see our simple guide to MTD here), and ensure that the business has a compliant system in place. There are many cloud accounting software providers that are compliant and ready for MTD so make sure your software is one of them and you are also ready to go.
How to register for MTD
You will be required to register for MTD through the HMRC website, and you can find the link here. We would recommend you register in good time before the business needs to submit its first applicable VAT return. You should only do this once you have submitted the last VAT return for periods prior to the start date, as you will not be able to access the old service once registered. You can then link your software to your government gateway account.
How to keep your records compliant
Having a software that is compliant does not necessarily mean that the records are kept in a compliant way. Postings to the software need to be made for each transaction or via a digital link. This is relaxed slightly for posting daily takings. A digital link is a transfer of data between software, that is without the involvement of manual intervention. A digital link includes linked cells in spreadsheets. You can find out more about what a digital link is on point 4.2.1 of HMRC's guidance here.
There’s no going back
Be aware that once you have registered for MTD, it is permanent. If you are currently VAT registered but your turnover is under the threshold, you will need to review this on a rolling twelve month basis, so do check the position at the end of each calendar month to make sure you don’t miss your due registration date. If you find that you have crossed the threshold, you will need to register for MTD in good time for the next VAT return as there will be penalties for not being compliant.
HMRC penalties can be high so it can be costly to make mistakes. We recommend that you keep yourself informed and stay one step ahead. We recommend that you make sure you are using a cloud accounting package so you are compliant but this should also be beneficial for your business.
If you are unsure, seek professional advice. To find out how we can help you improve your accounting process and what services and tools we can offer you, please do get in touch to arrange a call.
It is our recommendation that you seek independent professional advice and do not treat this article as advice specific to you, this is for general guidance.
FUSE is an independent Chartered Certified firm of accountants and tax advisors based in Highgate Village, North London. We provide a dynamic range of services to clients working in property, media, entertainment and professional services. Our clients vary in size from self employed sole traders, small enterprises and medium size businesses. We believe that comprehensive financial planning and sound business financial advice are the keys to growth and profitability.