What is Making Tax Digital for VAT?
MTD for VAT requires businesses to keep digital records and submit VAT returns using compatible software.
Is Making Tax Digital for VAT compulsory?
Yes, since April 2019 for businesses with turnover above the VAT threshold, and since April 2022 for all VAT-registered businesses.
What records do businesses need to keep digitally?
Businesses need to keep records such as their business name, address, VAT registration number, and details of VAT accounting schemes used.
Who does MTD for VAT apply to?
MTD for VAT applies to all VAT-registered businesses, including those voluntarily registered for VAT.
Who is exempt from MTD for VAT?
Some businesses may be exempt due to reasons such as insolvency or religious beliefs.
What is a digital record?
A digital record is an electronic record of transactions that must be kept using compatible software.
What if I go over the VAT threshold temporarily?
If your turnover exceeds the VAT threshold temporarily, you must comply with MTD for VAT during that period.
Will the due dates for paying tax change under MTD?
No, the payment dates for tax will remain the same as under Self-Assessment.
Why is MTD being introduced?
MTD aims to promote better and more timely record-keeping to reduce errors and mistakes, and to modernize HMRC’s IT platform.
My business is VAT registered but the turnover is below £85,000. Will we need to submit VAT returns under MTD?
You will need to comply by 1 April 2022.
Which of the popular software providers have MTD products?
Check out this link to a software list (updated regularly): https://www.gov.uk/guidance/find-software-thats-compatible-with-making-tax-digital-for-vat
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).
Does HH have any software to assist clients?
The firm has invested in VAT Controller bridging software that is fully compliant with the MTD requirements. Find out more.
How does the HH “bridging” software work?
Provided that the client can export their VAT data into an Excel Spreadsheet (2016 and above) and has access to Microsoft Edge, 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.
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 2022. Therefore, no further add on software;
- Full audit trail for adjustments;
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.
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.
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.
What if taxpayers need help with MTD?
Hillier Hopkins can help! Call is on +44 (0)330 024 3200 today.