Are you aware that from April 2019, Making Tax Digital (MTD) will be compulsory for eligible companies?
Any VAT registered businesses (with a turnover exceeding £85,000 per annum) will need to keep digital records and submit VAT returns online. Businesses below this threshold will not be required to use the system, although they can do so voluntarily. VAT has been online since 2010 and over 98% of VAT registered businesses already file electronic returns.
The government has introduced MTD to modernise the tax system with the goal of simplifying tax returns, reducing errors and making it easier for businesses to maintain more accurate and timely records.
HMRC will publish a list of software which will comply to their standard i.e. it should calculate the VAT return and submit it seamlessly to HMRC via an Application Programme Interface (API). Most accounting software providers will make changes so that their software meets these requirements.
If your business is using manual records, now is the time to thinking about transferring to digital. When choosing to implement a new accountancy software (or deciding whether your current software is suitable), you should ensure that it can store and retain records electronically, has an API platform which can provide information to and receive data from HMRC.
The digital records should be retained for 6 years and must include:
- Business name, principle place of business and VAT registration number (including the VAT accounting scheme used by the business)
- The VAT account showing the audit trail between primary records and the VAT return
- Details about supplies made and received