Making Tax Digital (MTD) for VAT’s roll-out date is nigh. Whilst HMRC have run their awareness campaign for the initiative, some taxpayers are still unaware of the change or are concerned how to ensure they’re compliant in time.
The digitalisation of VAT is quite easy once you understand it and know how to prepare. Here we provide a summary of MTD for VAT so you can get ahead before its launch date.
What it is
Quite basically, MTD for VAT is the process of filing your VAT records in an electronic format. It will require an entirely digital path to communicate the information to HMRC’s application programming interface (API) platform. To do so, compatible software should be employed. Spreadsheets are accepted, but digital links will still be required, and therefore bridging software is a necessity.
Who it affects
You may be exempt from submitting your tax electronically. Only those who are VAT-registered and have a taxable turnover above the current threshold (£85,000 in 2019/20) are required to file this tax digitally. However, you may have the option to apply for exemption if you have an acceptable reason why doing so isn’t feasible, for example due to age, disability or living in a remote location.
When it will impact you
If you do need to submit your VAT digitally, you may not need to instantly. You aren’t legally required to submit your information in this way until the start of your first VAT period after the roll-out date.
For instance, if your current quarterly period began on 1st March 2019, then the return can be filed using your existing method. Once these three months are up, on 1st June, this would entail MTD-compliant VAT submission. However, you will need to start keeping digital records from the start of your VAT period.
Here’s a handy breakdown showing example VAT periods and when your first MTD submission would be:
|VAT period||First MTD-compliant submission|
|1st April-30th June 2019||7th August 2019|
|1st May-31st July 2019||7th September 2019|
|1st June-31st August 2019||7th October 2019|
Information to retain
It’s not necessary to keep all related data in a digital format. HMRC have stated that they will require information like your VAT registration number and details of supplies made and received electronically. There may be some forms of data (such as invoices) that don’t require digital submission, but you can opt to do so. There are also specific records that HMRC say should be kept in their original format, such as the C79 form (import VAT certificate).
How you benefit
The purpose of the initiative is to boost efficiency and compliance. So, if you do need to submit your VAT digitally, it should simplify your submission process and reduce errors. This is because the MTD-compatible software will organise the information for you and prepare it into the VAT return. The ability to enter data at any time will also allow you to track it throughout the tax year, meaning you’ll have more control over your information too.
Preparing for MTD for VAT
You can benefit by getting prepared for MTD for VAT as soon as possible. Simply select a suitable software provider whose tools will do the calculations for you and provide a real-time picture of your financial situation along with tax-saving suggestions. Plus, by getting familiar with the MTD-compatible software earlier, you’ll be able to file your VAT digitally with ease.
GoSimpleTax have launched a new tool that has exactly these features and more: GoSimpleVAT. It works seamlessly with other digital platforms too. Register for a free trial today