Making Tax Digital Update - Compliance and Solutions
From 1 April 2021, UK VAT registered businesses will face more stringent Making Tax Digital (MTD) obligations.
These obligations were due to be implemented on 1 April 2020 but they were postponed by the Covid-19 pandemic.
Who is affected? VAT-registered businesses, individuals and charities with a taxable turnover above the VAT registration threshold (£85,000) are required to follow the MTD rules by keeping digital records and using compatible software to submit their VAT returns. We have previously advised our VAT registered clients of this and for many, helped to implement suitable, compliant software, either via our preferred partners at Quickbooks, Bokio and now Free Agent, or our own in house bridging solutions.
Where taxable turnover is below the VAT threshold they can voluntarily join the MTD service now but from April 2022 all VAT returns will need to be completed and submitted using compatible MTD software. Again if you do not have done so already please contact us so we can assist you with implementing the correct set up .
Digital records Under the MTD rules, UK VAT registered businesses with turnover above the VAT registration threshold must keep and maintain VAT records digitally in 'a compatible software package that allows you to keep digital records and submit VAT Returns' or use 'bridging software to connect non-compatible software (like spreadsheets) to HMRC systems'.
This digital record keeping requirement is compulsory for all VAT periods beginning on or after 1 April 2021.
Records included under this requirement include sales and purchase invoices with VAT.
The data that must be stored digitally includes:
business name, address and VAT registration number;
VAT accounting schemes you use;
VAT on goods and services you supply (everything you sell, lease, transfer or hire out);
VAT on goods and services you receive (everything you buy, lease, rent or hire);
any adjustments you make on a VAT return;
the ‘time of supply’ and ‘value of supply’ for everything you buy and sell;
the rate of VAT charged on goods and services you supply;
reverse-charge transactions – where you record the VAT on both the sale price and the purchase price of goods and services you buy;
total daily gross takings if you use a retail scheme;
items you can recover VAT on if you use the Flat Rate Scheme; and
total sales, and the VAT on those sales, if you trade in gold and use the Gold Accounting Scheme.
After the initial "soft landing" of MTD, HMRC are now introducing a penalty system for non compliance, effective for the first VAT returns filed after 1 April 2021. So while most of our clients have already addressed this and indeed embraced the benefits of digital accounting, it is imperative that your business has an appropriate MTD solution in place. Please contact us today if you have any queries or need further assistance