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Are you Ready for Making Tax Digital for VAT?

Making Tax Digital

Making Tax Digital (MTD) for VAT will come into force in April 2019, and will mark the end of the first stage in the government’s quest to digitise the UK tax system. HMRC boldly state their ambition to become “one of the most digitally advanced tax administrations in the world” as well as their belief that their planned reforms of the UK tax system will make it more effective, more efficient, and easier for taxpayers to get their tax right. For now, the changes are limited to VAT, but expect income tax and corporation tax to follow in the next few years.

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So, how do you know if you’re affected, and what do you need to do?

What is Making Tax Digital for VAT and who is affected?

From April 2019, any business that has a turnover over the VAT threshold of £85,000 (2018/19) and is registered for VAT will have to keep digital records and submit their VAT returns using MTD compatible software.  

If you’re not registered for VAT, the changes obviously won’t affect you, and if you registered voluntarily but your turnover has never been above the threshold, you’re exempt for now. Even if you’re exempt you might still want to sign up for the MTD service; more on that later.

What are the software requirements?

As a minimum, your MTD compatible software will need to:

  • Allow you to keep digital records
  • Allow you to digitally report VAT information to HMRC
  • Allow HMRC to send information to you

These functions don’t necessarily need to be achieved via the same software. For example, you could keep your records using a spreadsheet application and use bridging software to communicate with HMRC. Where your accounting and communication software are different, they’ll need to be connected via digital links.

Keeping digital records

This could mean using specialist accounting software, or you might use a simple spreadsheet application, depending on the needs of your business. Some businesses might keep their records in several different software packages, and this is fine as long as data is moved between them digitally, rather than by manual entry.

Submitting and receiving information

As well as keeping digital records, you’ll need to be able to exchange data through the MTD service. If you’re using specialist accounting software it could well have this capability built in. Otherwise, you’ll need to use bridging software to take the information from your records and submit it to HMRC in the required format.

Digital links

Under MTD, where you use more than one piece of software, the movement of data between them must be achieved digitally, rather than by manual data entry. This includes importing data from a spreadsheet, for example using a CSV upload, but not via cut and paste.

If you’re with Orange Genie Accountancy

If you’re lucky enough to be with Orange Genie Accountancy, there’s no cause for concern. We provide you with access to online accounting software which meets all MTD requirements and we’ll prompt you to keep the correct records and submit your return in the correct way. All you have to do is follow your accountant’s advice. If you have any questions or concerns, just contact your Orange Genie accountant who will be more than happy to help.

Should you use MTD voluntarily?

Digital records have obvious advantages over manual ones, and it’s likely that most businesses are either using digital records already or would benefit from doing so. Even if you’re exempt, you’ll have to start using the new system at some point and it’s difficult to see a downside to sorting it out now rather than putting it off. If you’re registered for VAT, even if you’re exempt for now, we’d advise you to consider signing up for MTD voluntarily.

If you have any questions about MTD or if we can help in any way, please call our expert team on 01296 468 483 or email info@orangegenie.com.

 

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