FEATURE: TAX & ACCOUNTING
Making Tax Digital for VAT- everything you need to know
By Wendy Andrews, VAT Director at Bishop Fleming
What is Making Tax Digital for VAT? Making Tax Digital for VAT (MTDfV) starts on 1 April 2019. It requires businesses to keep their accounting records in a digital format and to be able to prepare and submit online VAT returns from those digital records. It will therefore be important to
keep your records in an electronic form and up-to-date so that your software can collate and prepare the VAT returns on time, and without any additional manual calculations.
Why is MTDfV being introduced? MTDfV is being introduced, according to the Government, to reduce the amount of tax lost to the Treasury through incorrect VAT returns being made, due to errors and mistakes caused by inadequate record keeping. It believes this can best be addressed through digital record keeping. It may, in fact, turn out to be the
case for some businesses that they actually save tax through keeping their records more up-to-date, as they are more likely to be recording all their allowable costs in a timely manner. Whether or not the move to
digital reporting will lead to cost savings for business is a contentious issue. Those businesses already using
accounting software, or outsourcing their accounting and VAT compliance processes, should incur the least cost and disruption from MTDfV, with the reverse more likely to be true where a business needs to purchase or upgrade software, or perhaps use an external agent for the first time. There will be a degree of
learning for all businesses in the 30 Chamber Profile Spring 2019
short term, but in the longer term the regime will become familiar and the norm. It is also likely in the longer term
that HM Revenue & Customs (HMRC) will start to look at submitted data much sooner than before and to audit digital records to ensure they are being properly maintained.
When does MTDfV affect me? Businesses affected are those that are VAT registered and have a taxable turnover above the VAT threshold of £85,000 in any 12- month period. Businesses that are voluntarily
VAT registered do not fall within the rules, but they can opt in if they wish. For those affected, the first VAT
period starting on or after 1 April 2019 will need to be made digitally - and the records supporting that return will also need to be digital.
Deferred starting date for some Some categories of organisation have had their start date deferred by six months until the first VAT period beginning on or after 1 October 2019. These categories include trusts,
unincorporated not-for-profit organisations, VAT groups and divisions, certain public sector entities, local authorities, public corporations, overseas-based traders, businesses required to make payments on account and those using the annual accounting scheme. Any deferral relates solely to
entities falling within the above categories, and not to any associated entities, so some organisations may end up with more than one start date.
It’s important that your electronic records are kept up-to-date
‘Whether or
not the move to digital reporting will lead to cost
savings for business is a contentious issue’
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