Here are some of the most common frequently asked questions answered by our VAT & Indirect Tax expert Ruth Corkin:
1. My business is VAT registered but the turnover is below £85,000. Will we need to submit VAT returns under MTD?
No. However, you can opt into MTD if you wish.
2. My business is VAT registered and our turnover is above £85,000. However, we receive some exempt income and make supplies overseas. Will we need to submit VAT returns under MTD?
The £85,000 threshold refers to taxable supplies (standard, zero and reduced rated). If the exempt or overseas supplies are under £85,000 you do not need to file under MTD (but can opt to do so if you wish).
3. Which of the popular software providers have MTD products?
The following have software that is available now:
a) Sage Business Cloud (formerly Sage One);
b) Sage 50 Cloud Accounts (v24 and above) Essentials/Standard/Professional
c) Quick Books
d) Sage Line 500 and Line 1000
f) Free Agent
g) Farm Data
h) Farm Plan
k) Oracle Netsuite
m) Wolters Kluwer
Link to software list (updated regularly): https://www.gov.uk/guidance/find-software-thats-compatible-with-making-tax-digital-for-vat
4. What happens if we have old software/spreadsheets/manual books?
You will need to at least put the information into a spreadsheet. You can use “bridging” software to file the return. There are quite a few on the market, but not all of them have the full suite of functions (e.g. keeping a digital VAT account, tracking payments and submissions).
The firm has invested in VAT Controller which is fully compliant with the MTD requirements. We have two set pricing models:
a) Software licence only: £275 + VAT year 1 (includes a £75 set up fee). £200 + VAT years 2 and 3. Discounts available for 3 or more users;
b) Submission by HH: £300 + VAT per quarter (includes software, high level sense check of the data, formatting of data and submission of return)
We can also look at undertaking the bookkeeping and VAT return on a bespoke basis.
6. How does the HH “bridging” software work?
Provided that the client can export its VAT data into an Excel Spreadsheet (2007 and above) and has access to Internet Explorer 11 (or above), Google Chrome or Firefox browsers, the data can be linked to a VAT Pack (template). This is then linked to the API that HMRC has specified to file the returns.
7. Does the HH “bridging” software have any other features?
Yes, it has:
- Ability to store VAT documents within the software;
- Review/authorisation function plus the ability to record review checklists ;
- Automatic emailing reminders to staff;
- Ability to have sub returns for VAT group members/divisions/activities that are then consolidated for one return;
- Can record individual properties and their records for Real Estate clients. Tracks the acquisition/disposal/ Capital Goods Scheme requirements;
- Has full digital links in accordance with the legislation from 1 April 2020/1 October 2020. Therefore, no further add on software;
- Full audit trail for adjustments;
8. My business is partly exempt. How do the adjustments feed into the software for MTD?
The partial exemption calculation is not a VAT required to be kept under the digital record keeping rules. Once the value of VAT being reclaimed is calculated, both the recoverable and non-recoverable input tax can be journaled manually into the software. However, this has to be done before the return is submitted.
9. How are retail takings treated for VAT purposes?
There is a relaxation for retailers which means that the total of the daily gross takings can be journaled into the software. This should be done on a daily basis from the till records (till roll Z reading). It will be necessary to split the takings total between the different VAT rates.
10. My business receives information from a third party. How does this link to MTD software?
Third party data can be entered manually into the software when it is received. Once in the software, any further adjustment to the data has to be digitally linked. For example if you receive a quarterly statement for the rents received, it can be entered into the accounting software as if it were a single invoice.