The first stage of the UK government's Making Tax Digital system is rolling out for VAT in April 2019, and VAT-registered businesses will need to start making digital VAT returns from this date. If you haven't already started investigating the requirements for digital VAT returns, you need to put this in place as soon as possible.
What Will I Need To Do?
Once the digital system has been fully rolled out, the UK will have an advanced tax administration which is digital for businesses and individuals. This will make it much easier to sort out tax affairs and access records in real time.
The Making Tax Digital changes currently being put in place relate to VAT only, and the digital income tax system will not be rolled out until 2020 at the very earliest.
If your business is VAT-registered and has a turnover that's over the threshold of £85,000, you will have to start submitting digital VAT returns from 1 April 2019. One of the main benefits for businesses and their employees is that the new digital returns cut out any need for recording VAT separately in business accounts. Many businesses still keep manual VAT records or maintain VAT records on spreadsheets, but the digital system requires every business to maintain complete VAT records in digital format and submit these records directly to HMRC when filing VAT returns.
Do I Need To Upgrade My Accounting Software?
In order to meet the requirement for digital returns, organisations will need to upgrade their accounting software. The government has provided a list of suppliers whose software has already been tested and complies with digital requirements - this list will be updated on a regular basis.
Organisations that currently submit VAT returns on spreadsheets will be required to upgrade to bridging software in order to meet the new requirements. And, again, approved bridging software suppliers are listed on the government website.
Ultimately, once digital VAT returns are in place, organisations will find it's an easy matter to download their VAT records directly to HMRC and meet the deadline. What's more, you will be able to access your digital account at any time to check on data, wherever you happen to be.
The Making Tax Digital service will allow organisations to access all their financial data from just one account, when it is fully up and running. This will make it far easier to assess the health of the business and work out exactly what taxes are due and what date they are due by.