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Making Tax Digital and VAT

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From April 2019 all VAT registered businesses with turnover above the VAT threshold will be required to maintain digital records and will need to send their VAT information to HMRC using third party commercial software.

Importantly, HMRC’s online portal will no longer function for businesses registered for VAT with turnover above the VAT threshold, although it will remain available to all other businesses that complete a VAT return, but have turnover below the VAT threshold.

Who’s in?

MTD for VAT will apply to all VAT registered businesses with turnover above the VAT threshold. This includes unincorporated businesses, companies, LLPs, and charities. Businesses registered for VAT but with turnover below the VAT threshold can opt in and file their VAT information via MTD if they wish.

Start date

A business will have to keep digital records and submit its VAT returns digitally with effect from the first VAT return period beginning on or after 1 April 2019.

Free software

As HMRC are gradually withdrawing their VAT filing portal, they are looking to secure alternative commercially provided software than can be used for free.

Liquid will provide a single company, single user version of Liquid VAT Filer free of charge to any VAT registered business, but there are additional charges for additional companies or users (call us on 0161 413 5050 to discuss this).

If you use Liquid Accounts the move to VAT MTD will cost you nothing as this new functionality is included.

 
Liquid VAT Filer meets all the requirements HMRC have laid out to be recognised as a third-party commercial provider, as follows:

 
Spreadsheets

The use of spreadsheets will be permitted although they will need to be combined with third-party commercial software, such as Liquid VAT Filer, using APIs, to ensure a seamless flow of data from the business to HMRC (and vice versa).

Digital record-keeping requirements

HMRC has confirmed that the requirement to keep digital records does not mean that businesses will have to make and store invoices and receipts digitally. Businesses can continue to keep documents in paper form if they prefer, although transactions will need to be stored digitally.

Records must be kept for six years (or 10 years if you use VATMOSS). Digital records will need to be maintained for six years following deregistration.

This requirement is built into Liquid VAT Filer.

Monthly and non-standard returns

Businesses will still be able to submit monthly and non-standard returns under MTD.

Flat rate scheme

Businesses will still be able to use the flat rate scheme under MTD meaning digital records of purchase invoices will not be required (unless they relate to capital items which cost more than £2,000 including VAT).

Annual accounting scheme

Users of the annual accounting scheme will continue to send in one annual VAT return rather than quarterly reports under MTD.

 

So, a lot to take in and making sure you have the right solution in place is going to be essential to ensure a successful move to VAT MTD in time for the April 2019 deadline.

We have provided a more in depth analysis of how MTD is likely to affect your business and a list of suggested considerations here.

If you would like to know more about the Liquid VAT Filer application, have a read of the User Guide here or sign up for the free version here.