Making Tax Digital (MTD) is a scheme that will gradually push businesses towards digital record keeping, with a view to move tax filing and payment exclusively online. Most of these will come into force in 2020 at the earliest, but some changes are already being implemented.
MTD for VAT begins on 1 April 2019. What this means is that businesses with turnover exceeding the VAT registration threshold - £85,000 - are now expected to fully comply with MTD requirements. If your turnover is lower than £85,000, then compliance is optional.
Digital Record Keeping Requirements
Businesses are required under MTD for VAT to make records digital and, if necessary, upgrade to MTD compatible software in order to file their VAT returns digitally. These are the types of records which must now be stored digitally:
Designatory data: your business name, address, VAT registration number, and any VAT schemes used.
Supplies made, including the date and value of the supply as well as the rate of VAT charged. Note: several supplies made at once do not have to be recorded individually. Instead, it is fine to record the total value on each invoice.
Value of outputs for the VAT period, split by standard rate, reduced rate and zero rate.
Supplies received, including the date, value and amount of VAT to be reclaimed.
The Digital VAT Account
All registered businesses are required by law to keep and maintain a VAT account. Information held in the account must now be kept digitally. These records form the basis of a VAT return and so it's important that they are accurate and reliably kept.
HMRC provides an extensive list of MTD compatible software suppliers that are capable of recording and preserving data electronically, sending this digitally to the tax authorities, and then receiving relevant information back.
Ensure that your business is MTD-compliant by following the guidance on the HMRC web portal and make sure that you stay fully informed while taxation in the UK undergoes one of its most significant reforms ever.