Making Tax Digital for VAT

We have created an end to end solution for our clients that is Making Tax Digital (MTD) for VAT ready. Please contact us as soon as possible on 029 20 529 529 so that we may discuss your options with you. Alternatively, please email us and a member of our team will contact you.

We have a bespoke bookkeeping solution which ties in with our MTD for VAT solution. Full details can be found here.

Making Tax Digital Summary

Under Making Tax Digital (MTD) for VAT, known as 'Making VAT Digital' (MVD), most VAT businesses are required to use 'functional compatible' software in order to report VAT.'

• MVD commences 1 April 2019, unless the business is deemed as complex, in which the start is deferred until October 2019.

MVD means that:

• VAT registered businesses with turnover exceeding the VAT Registration Threshold will have to:
• Keep records digitally for VAT purposes
• Submit VAT return information to HMRC through MTD functional compatible software

Who has to join MVD?

• VAT registered businesses whose taxable supplies exceed the VAT registration threshold in any 12 month period ending or after 31 March 2019 are mandated into MVD.
• A VAT registered business whose taxable supplies do not exceed the VAT registration threshold can elect to ignore this exemption and so opt in to MVD.
• A business who is mandated into, or voluntary joins MVD, remains in MVD until they deregister for VAT, or meet one of the exemptions below. They cannot leave MVD merely because the taxable supplies drop below the VAT registration threshold later on.
• Businesses on the deferred list join six months later in October 2019.

In October 2018 HMRC announced that it is allowing a small number of VAT registered entities to defer mandation from the requirements of MVD by six months. They include, VAT groups, annual accounting scheme users and public sector entities.

Taxpayers who are allowed to defer entry into MVD until 1 October 2019 are as follows:

• Trusts
• 'Not for profit’ organisations that are not set up as a company,
• VAT divisions and VAT groups
• Those public sector entities required to provide additional information on their VAT return (Government departments, NHS Trusts), local authorities
• Public Listed companies (PLCs)
• Traders based overseas
• Those required to make payments on account
• Annual accounting scheme users

Digital records

• Digital records must be kept on functional compatible software.
• Digital records record:
• Business name
• Principal place of business
• VAT registration number
• Details of any VAT scheme used, such as Cash Accounting, Flat Rate Scheme, Annual Accounting etc
• A VAT account
• Information about:
• Time of supply
• VAT rate used
• Digital records must be retained within functional compatible software for up to 6 years and for up to 6 years following a deregistration.

• MVD software has to be functional compatible software, i.e. capable of connecting to HMRC’s systems via Application Programming Interface (API).
• The information submitted will as a minimum include the current 9 VAT Return boxes.
• Additional supplementary information may be submitted voluntarily.
• VAT accounting entries should only be physically entered once.
• Bridging software will act as the link between HMRC and the user. Bridging software will extract the digital information and submit it to HMRC.
• The software used to maintain digital records must be capable of working with bridging software in order for the information to be filed. For example, commercial accounting software will likely be set up to submit to HMRC directly, i.e. it has the bridging software.
• Spreadsheets alone can be used for digital record keeping, as long as bridging software is available to extract the required information directly from the spreadsheet and send this to HMRC, and receive information from HMRC.
• Alternatively, spreadsheets can form one part of the functional compatible software along with other software. As long as there is a digital link between the various parts of software, and at the end the information can be submitted digitally to HMRC, this will be acceptable.