WHAT IS MAKING TAX DIGITAL AND WHY DO I NEED TO WORRY ABOUT IT ?
Making Tax Digital (MTD) is the tagline for a group of major changes HMRC is making to the way tax payers process their tax affairs, the plan being that eventually every individual/business will have their own personal tax account maintained on a digital (computerised) basis. In the first instance the new changes will just affect VAT registered businesses with an annual turnover of greater than £85,000 and will come into effect from 1 April 2019. More information about these changes can be found at:
OK, SO HOW WILL MTD CHANGE THE WAY I DO MY VAT RETURNS ?
After 1st April 2019 has passed the current computerised gateway used to submit VAT returns will be closed and replaced with one which will only accept VAT returns submitted using an Application Programming Interface (API) i.e. they must be submitted using some form of software.
WHAT SORT OF SOFTWARE CAN I USE ?
As a minimum the software will need to be able to:
- Process and save records in a digital form;
- Create a VAT return from its digital records;
- Communicate with HMRC using the API platform so that the business/individual can receive from, and send data to HMRC.
WHAT ARE THE NEW RECORD KEEPING REQUIREMENTS?
HMRC will require the following data to be kept digitally:
- The business name and address;
- The business VAT registration number;
- A record of any accounting schemes used by the business;
- In relation to purchase invoices received by the business it must record:
– The time of supply;
– The value of the supply (including any unclaimable VAT);
– The amount of VAT which can be reclaimed;
- In relation to sales made by the business it must record:
– The time of supply;
– The value of supply;
– The rate of vat charged on that supply;
WHAT DO I NEED TO DO NOW ?
You need to be looking at your software and recording keeping method to see if it will comply with the new regulations above and if it does not, making plans to purchase a suitable form of software which will be operational by 1st April 2019. It is important to note that this is not a 5-minute job and it may take time for any changes to be made and bedded in so you need to be thinking about this as soon as possible.
WHAT CAN HODGSON HEY DO TO HELP ?
If we currently submit your return, we can assess if the way your accounting records are currently kept will comply with the new regime and suggest what we think might be the best option for you and your business. This could include upgrading your existing software package or starting to use software or excel if you have previously kept your records using a manual system.
If you keep your own records and submit your VAT returns yourself you can contact us and we can suggest suitable amendments as appropriate.