Making tax digital for VAT
From April 2019 there will be changes in the way that UK VAT payers file their tax returns. It’s a bold decision, but one that’s been taken to help businesses to stay on top of their tax. We’ve partnered with Warrington-based accountants, Voisey, to provide some information on what the implications of Making Tax Digital are for you.
What is Making Tax Digital?
Making Tax Digital (MTD) is a government initiative to make it easier for individuals and businesses to get their tax right, evolutionise the UK tax system and ultimately bring an end to self-assessment. HMRC’s ambition is to become one of the most digitally advanced tax administrations in the world and MTD is the first step in this process.
Who does it apply to?
At the moment, MTD has only been introduced for VAT and applies to most VAT registered businesses from 1st April 2019. Therefore it applies to most businesses with a taxable turnover above the VAT registration threshold, which is currently £85,000. Businesses below the VAT threshold which have voluntarily registered for VAT can opt to join the scheme.
What does it mean if MTD for VAT applies to me?
Under the new rules, these businesses must keep digital records for VAT purposes and provide their VAT return information to HMRC using MTD functional compatible software. Submission of VAT returns manually through the post or via the existing Government Gateway website will no longer be accepted by HMRC. There are a number of different third party software packages available that are compliant with the new rules.
Keeping digital records will not mean businesses are required to use digital invoices and receipts but the actual recording of supplies made and received must be digital.
Are there any exemptions?
As with electronic VAT filing at present, there will be some exemptions from MTD for VAT. However, the exemption categories are tightly-drawn and unlikely to be applicable to most VAT registered businesses.
Will there be penalties for not complying?
Yes, failure to comply with MTD will incur a point based penalty scheme. More information is available from HMRC.
If you have any more questions, feel free to contact us, or speak directly with our partners at Voisey Chartered Accountants on 01925 650703.