It’s finally arrived – after faltering pilots and delays, Making Tax Digital for VAT came into force on 1st April 2019. Are you fully prepared for the next big business challenge?
Been under a rock for the past few months and don’t know what MTDfV is? In a nutshell, it’s the way that HMRC now require businesses to file records digitally and submit VAT returns via compatible digital software. It applies to almost all UK VAT registered businesses with an annual turnover of £85,000+, including charities and overseas-based businesses.
If you haven’t already moved from manual records to a software solution, or upgraded your existing software, then time is against you. Before you can submit your returns, you have to register for the MTDfV system. Once registered, you can no longer submit VAT returns the ‘old’ way.
Creating ‘digital links’
It is still possible to maintain financial records in more than one programme but there must be digital links between each software product. Spreadsheets are also permitted but existing spreadsheets do not have the functionality to file a VAT return, they must be API enabled or be used in conjunction with compatible software so that the data can be submitted and received by HMRC.
Know your start date
HMRC postponed the date for mandatory filing until 1st October 2019 for businesses with more complicated VAT situations (check with CRM or the HMRC ‘VAT Notice 700/22: Making Tax Digital for VAT’ for details). These organisations are not required to comply with ‘digital links’ requirements until 1st October 2020. So it is very important to check whether HMRC expects your business to start using MTDfV from 1st April or 1st October.
Which accounting software is compatible?
Unfortunately, HMRC does not provide the compliant software, it is up to the business to find the right software for them. At CRM, we have tested many of the cloud accounting software options on the market and are satisfied that Xero, Kashflow, Sage, Freeagent or our own cloud accounting software, offered in collaboration with Iris, will ensure that you comply with MTDfV.
Can you say ‘yes’ to these points on your path to becoming MTDfV compliant?
- Do you know whether MTDfV becomes mandatory for your business on 1st April or 1st October 2019? Do you have a letter from HMRC confirming that start date?
- Have you evaluated the relevant software products to decide which meet your needs and is compatible with the bridging software to submit your VAT returns?
- Can you map the VAT audit trail in your current accounting systems and have you identified where digital links are required?
- Have you considered the quality of the data you will be sharing with HMRC?
If you’re still struggling to make sense of Making Tax Digital for VAT, get in touch with the experts at CRM on 01865 379272, check out the Making Tax Digital publication produced by the Government or contact the HMRC VAT Helpline.