TAX For Companies

Making Tax Digital (MTD) - an update on VAT

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As some of you may (or may not) have heard, HMRC have been pioneering a way of making tax and VAT reporting more autonomous in line with the digital enhancements in technology in recent years. This has included the implementation of online accounts for all taxpayers as well as a system for payroll called Real Time Information (RTI for short). Given the increasing digital exposure through tablets and smartphones, HMRC are continuing to push on.

Making Tax Digital launched by HMRC

Step forward HMRC’s next masterpiece. Making Tax Digital (MTD). This was previously supposed to be implemented in 2017 for small sole trader businesses in order to report their income and expenses (and estimated tax bills) on a quarterly basis. However, given the complexity of such a system and rolling this out nationwide in such a short timescale, HMRC decided to delay this.

Making Tax Digital mandatory from 2019

It has however been confirmed that from 1 April 2019, MTD will be mandatory for any business with a turnover over and above the VAT registration threshold. What this means is that from this date, businesses who fall within the MTD requirements will be required to keep specified minimum records in their VAT account and to also submit the current nine-box VAT return to HMRC via dedicated Application Program Interface (API) that is linked with accounting software of Excel Spreadsheets. What this ultimately means is that for smaller businesses who solely rely on Excel and spreadsheets, they will need to look into and invest in software that is capable of linking their documents with HMRC’s gateway through an API platform. With the platform becoming available from April 2018, the options available to businesses will become more apparent over time. The alternative option for these business who had previously been operating solely on spreadsheets could be to invest in more expensive dedicated accounting software which has been developed to incorporate the API software. This however make seem unnecessary from both a cost and time perspective.

Tips for dealing with the Making Tax Digital (MTD) deadline

Therefore, with only a year to go, it is important that you and your business act now to make sure you do not fall foul of the changes. The other items which you may wish to think about include:
  • There will be additional information required to be kept in the VAT account (although not submitted).
  • New penalties for late filing and late payment of VAT.
  • Possible changes to filing deadlines falling to the end of the month following the end of the VAT return period (i.e. losing the additional 7 day grace period).
  • Some of you will be exempt from MTD and will not have to file returns this way – therefore it’d be best to check.
As such, it might be a good idea for you (if the above affects / concerns you) to reach out to your current accountant and tax advisers to seek their professional guidance and help with regards to the software and API options available to you. If you wish to speak to a VAT specialist or want to discuss the MTD rules in more detail, then feel free to reach our specialists on 020 8429 9245 or email [email protected].

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