Every entity with a turnover above the VAT threshold (currently £85,000), will be required to use MTD, using compatible digital bookkeeping software. Information will be extracted from the digital records in order to populate the VAT return.
HMRC’s aim for MTD is to create an efficient system to make it easier to get tax calculations correct and for businesses and individuals to keep on top of their financial affairs. In practical terms it also links a summary to detailed transactions to ensure there are no errors.
VAT is the first tax selected for digitalisation in the UK. Under the new MTD initiative for VAT:
- From April 2019 all VAT registered businesses and organisations with taxable turnover above the VAT threshold of £85,000 will be required to maintain their accounting records digitally in a software product.
- Maintaining paper records will cease to meet the legal requirements in tax legislation.
- Accountants will not be able to take information from a manual or excel worksheet.
- Information to be submitted to HMRC will be the same as it is now. For VAT that is one total figure for each of the 9 boxes on the current VAT return. However, HMRC is going to enable the function of voluntarily providing detailed transactions. That will minimise the potential for queries (e.g. in the case of a refund calculation).
What do I need to do and what will it cost me?
- Do you do the bookkeeping within your company using a software like Xero, Sage or QuickBooks? No action to take, the software is compliant. For other software, check here to see if it is MTD compliant. If you would like us to review and advise, please contact us.
- Are you currently inputting records manually into a cash Book or Excel spreadsheet? You will need to change your bookkeeping procedure. Please contact us to help you. We can help you to find the right bookkeeping software at the lowest cost.