When Making Tax Digital (MTD) for VAT comes into place, adhering to its conditions will be a legal requirement. Being compliant is key, but this doesn’t mean that there isn’t any leniency in the system.
There have been many exaggerated claims about what you must and must not do to meet the demands for MTD. Here, we go through what you actually do need to become MTD-compliant.
Firstly, there is no change in the information you file via your VAT return. The same nine boxes of data need to be filled in, such as the time and value of the supply, and the rate of VAT charged. No additional data is required. The difference is the way in which it’s submitted.
From 1st April 2019, information should be stored and filed digitally. Whilst you’ll have likely seen ‘MTD-compatible software’, there is actually flexibility with how this works as well. For example, you can integrate spreadsheets.
Originally, HMRC had barred employing spreadsheets. However, they later took a U-turn and allowed their usage – though there are specific rules around this
From MTD for VAT’s roll-out date until 31st March 2020, you’ll be able to cut and paste information from your spreadsheets to transfer it. After this, HMRC will still accept spreadsheets, but instead the information must be communicated through bridging software. This is to ensure a completely digital path is maintained.
There is an exception to the cut and paste method. Some return information can only be transferred to a software product that is enabled for an application programming interface (API). The software provider can help guide you on this.
Whilst you will need some form of software, this doesn’t call for a bookkeeping package. Any additional services from a bookkeeper or accountant aren’t a legal requirement. However, you can still enlist these if you wish to, especially as they can help ensure accuracy with your VAT return.
Those who own larger businesses, for example limited companies with a number of employees, may prefer to seek further services as they will have more than just VAT to consider. Whilst MTD for Corporation Tax isn’t expected until at least 2020, you’ll want to ensure that the bookkeeper, accountant or software provider can also meet the criteria. Otherwise, you may have multiple solutions, adding to administration and costs.
It might be that you don’t want to change from your current bookkeeping package, even if it isn’t compliant with MTD. You don’t have to – under HMRC’s rules, there is no requirement to leave your current accountant, bookkeeper or tools, and purchase a new compatible version.
There just needs to be a way for the information to be received digitally, like through the use of bridging software. If this is preferred, then don’t waste time or money buying tools that won’t prove useful to you. Just ensure that the software you choose is definitely compliant. HMRC have released a list of software companies that have compatible tools.
Many enterprise resource planning software providers, such as Oracle, have announced that they will not support VAT filing under the government’s new MTD system. It is worth discovering if your provider is taking the same stance, and to put bridging software in place so that you remain compliant come April.
Liquid Accounts’ VAT Filer is already ready so you can get prepared before MTD for VAT is rolled out. No matter the accounting system you currently have in place (even if it isn’t provided by us), our Filer will link it to HMRC seamlessly.
For further information around our Filer or being compliant with MTD for VAT, get in touch with us by calling 0161 413 5050 or emailing email@example.com.