Are you aware that Making Tax Digital (MTD) for VAT is coming into force from April 2019? ICAEW statistics show that over 40% of businesses that it will impact are currently unaware of the government initiative. That’s why HMRC have started an awareness campaign.
The aim of this is not only to ensure that businesses know the digitalisation of VAT records and return submissions is happening, but to also clarify some of the information that has been provided so far. Here, we explore what you can expect from the campaign, and what the government has made evident so far.
What communications can you expect?
HMRC have begun closing the knowledge gap by releasing a new webpage. It details how businesses can prepare for the changes.
There will be more communications in the coming months. Further information will be revealed on HMRC’s social media and in the press, and you can expect to receive direct mail from them too. This will offer advice on planning for MTD for VAT, and the steps you need to take to sign up for it.
Can I still use spreadsheets?
Those who like using spreadsheets for their business records don’t necessarily need to remove these from their processes. However, they will need to be MTD-compatible, so bridging software may be required.
‘Bridging software’ are those digital tools that can take data from applications like spreadsheets, so that it’s in the right format to be submitted digitally to HMRC.
Do I need to transfer information digitally?
Transferring tax data between software products will need to be via digital links from 31 March 2020. Prior to this, you can still simply cut and paste information.
There is an exception to this though. You must do this digitally if there is any data that is to be transferred to a software product that can support the 9-box VAT return submission, and is enabled for an Application Programming Interface (API).
Who should sign up?
If your business is VAT registered and has income above the current registration threshold (£85,000 as of 2018/2019), signing up for MTD for VAT will be compulsory. You can still register if this isn’t the case though.
HMRC is encouraging those below the threshold to sign up, as it can still be beneficial. The advantages include reclaiming VAT on purchases made by your business in the last four years.
If you want to get ahead on this digitalisation, then there is a private pilot. You can email HMRC to express your interest, although they are limiting the businesses and agents that they invite to take part. A public pilot is expected in the near future.
Which software can I use?
There are a number of software companies that are working with HMRC to ensure their tools are compatible with MTD for VAT. Over forty of these will have their software ready in time for the first stage of the public pilot.
Liquid Accounts is one such supplier on HMRC’s list. We already have a VAT Filer that will allow you to familiarise yourself with how the digitalisation of VAT will work. Our 30-day trial lets you test it out free of charge.
To find out more information about our Filer or MTD for VAT, get in touch with us by calling 0161 413 5050 or emailing firstname.lastname@example.org.