Since April 2019 most VAT registered businesses with a turnover over £85,000 have been within Making Tax Digital (MTD) for VAT. This means that they have had to keep digital records and submit their tax returns via MTD compatible software.
From April 2022 MTD for VAT is being extended to all VAT registered businesses. In practical terms this means that they will no longer be able to submit their VAT returns via the old HMRC portal.
What are the requirements?
As already referenced, under MTD a business must keep digital records, but what does that mean?
As the name suggests your business records need to be kept in a digital format, so manual records will no longer be allowed and the records must include the following details:
- your business name, address, and VAT registration number
- any VAT accounting schemes you use
- the VAT on goods and services you supply
- the VAT on goods and services you receive
- any adjustments you make to a return
- the ‘time of supply’ and ‘value of supply’ for everything you buy and sell
- the rate of VAT charged on goods and services you supply
- reverse charge transactions - where you record the VAT on both the sale price and the purchase price of goods and services you buy
- your total daily gross takings if you use a retail scheme
- items you can reclaim VAT on if you use the Flat Rate Scheme
A further requirement is that there is a fully digital journey from the records to the submission of the VAT return. The simplest way to achieve this is to keep your records in ‘Functional compatible software’ that is software that can not only keep your records but also can provide and receive information to HMRC directly.
If your records are not kept in such software, for example if you use a spreadsheet, then bridging software can be used to make the submission but there must be a digital link between the software. Similarly, if a set of programs are used, there must be a digital link between the pieces of software.
There are a number of options available for software solutions and a list of compatible software is provided on the HMRC website at https://www.gov.uk/guidance/find-software-thats-compatible-with-making-tax-digital-for-vat
However, if you have any questions or concerns regarding MTD for VAT or would like to talk over your business and the software options that might work for you then please do get in touch by emailing mtd@streetsweb.co.uk
