Making Tax Digital for VAT Day is coming. It is weeks away and soon every VAT registered organisation must comply with a directive making them keep records in a digital manner.
The date is: 1st April 2019, when the vast majority of VAT registered companies and businesses must keep all records digitally (for the purpose of VAT) and provide those returns information records to the HMRC (Her Majesty’s Revenues and Customs) via software that is specifically compatible with MTD (Making Tax Digital).
The companies affected are all those with a tax turnover in excess of the VAT threshold. The current threshold is £85,000 but this figure can change at any time during a future Budget meeting by the Chancellor of the Exchequer.
MTD for VAT software is simple and affordable and as the VAT returns data is securely attached to the Cloud, it makes it compliant with the requirements demanded by HMRC.
There are some companies (approximately 3.5 per cent of all VAT registered organisations) that will not be required to begin using MTD for VAT software until 1st October 2019 instead. There are a number of organisations in this list but they mainly consist of overseas-based traders, some charities, trusts, not-for-profit organisations and NGOs.
If your business is below the VAT threshold it is still possible to sign up voluntarily. Several companies sit just below the threshold (currently £85,000) and although not mandated to use MTD for VAT software, it might be a good idea to get used to the system in readiness for when the business does eventually move above the line of the threshold.
The business will need to be ready to keep all records digitally from the start of the accounting period. The financial year begins on April 1st, so this is why the date has been chosen as the first day by which these records must be kept in such fashion.
What If You Use Spreadsheets?
Many companies use spreadsheets for recording their VAT transactions. Although you can still continue to use spreadsheets after the date for MTD for VAT has passed, compatible software is required so that you can send your VAT returns to HMRC in a legitimate manner.
Bridging Software for Use in Spreadsheets
Bridging software may be required in addition to the MTD software. This is so spreadsheet submissions comply with the demands of HMRC.