Making Tax Digital for VAT April 2019

From April 2019, the Government Gateway will be closed and access for submission of VAT returns will only be possible using MTD-compliant software.

Why are HMRC doing this?  Making Tax Digital is a HMRC program with an aim to digitalise the taxation system.  From April 2019 there will be some important changes relating to VAT returns and it is key that you are prepared for these.

The HMRC Four Foundations of Making Tax Digital (MTD):

1. Better use of information
2. Tax in real time
3. A single financial account for taxpayers
4. Interacting digitally with customers

Initially, only MTD for VAT will be required. This is to take effect from April 2019. Any Business above the VAT threshold of £85,000 turnover will have to keep digital records and submit their VAT returns digitally. This will need to done through MTD compatible software with effect from the first VAT return period beginning on or after 1 April 2019.

What are Digital Records?

1. A digital record should include:

• Gross amount
• VAT amount
• Net amount
• Date
• Type (sales, purchase, expense etc)

2. You can create a digital record by:

• Manually entering into software
• From a scanned document
• Digital invoice saved within the software
• From an automated feed

An advantage of keeping a digital copy of an invoice within your accounting software (if it has that facility) means that you do not need to keep a paper copy for the required 7 years. This will reduce the space required for archiving paper records.

From April 2019 you can only use HMRC approved software to submit your VAT returns. HMRC’s registered list of approved software is being updated regularly and the current list can be found here. Manual records and manual entry for vat returns through the Government Gateway will no longer be allowed. All VAT returns will require a digital link between the summary page containing the 9 boxes of your VAT return and the figures used to make up those totals. 

Recommended next steps

1. If you currently use manual records:

• You will need to move to MTD compatible accounting software for your VAT return submissions

2. If you currently use Excel spreadsheets for your records:

• It is possible to set up an Excel spreadsheet system for maintaining your records – however there must be a digital link between the tabs and formula requirements – you can’t just enter the 9 VAT return box figures on a spreadsheet.  A proven simple software solution is the recommended option.
• There are proven benefits of using software for an accounting system, and there are a number of options available that are MTD compliant
• We can assist with submitting your VAT returns – please contact us for more details

3. If you currently use software for your accounting system:

• You need to check your software version, and that it is definitely compliant for MTD – the current HMRC list can be found here.  If you are not sure, please contact us for more details
• There are proven benefits of using cloud software for an accounting system – please contact us for more details