The Making Tax Digital (MTD) strategy is key to government plans for making tax administration easier for businesses and individuals and the UK is likely to become a global leader in the arena of digital tax administration when it is fully rolled out.
About MTD For VAT Returns
The MTD legislation relates to income tax and VAT and is referred to in the Finance (No 2) Act 2017. However, the rollout has been slowed down, so only MTD VAT returns will be legally required in 2019. All other MTD regulations will not come into force until April 2020 at the earliest.
The new VAT requirements will be in place from 1 April 2019 and all VAT-registered business organisations with taxable turnovers over the threshold will need to maintain digital records and use the appropriate software for VAT returns from that date. VAT-registered organisations with more complex requirements can defer their start date until 1 October 2019.
The MTD VAT pilot is still taking place and difficulties experienced by organisations and individuals with more complex requirements are still being ironed out. About 3.5% of organisations will be allowed to defer their start date to October 2019, and these include trusts, non-profits, VAT divisions and groups, government departments, NHS Trusts, public corporations, local authorities and overseas-based traders.
What Should Businesses Do To Prepare?
If you operate a VAT-registered business and you're wondering just how to start getting ready for the new MTD requirements, you can source a good deal of information directly from the government's website.
Some of the steps you need to take now include:
Sourcing appropriate software for maintaining digital VAT records. If you already use accounting software, you will need to check that your provider is gearing up for the new MTD requirements. If you don't keep digital VAT records at present, you will need to find suitable software. The UK government has already produced a list of different software that can be used.
If you currently use spreadsheets to maintain VAT records you will have to start using MTD compatible software. You can opt for bridging software to make your spreadsheets compatible with MTD requirements.
Although you will not be required to make any additional VAT records for MTD, you will need to keep all records in digital format, and these will have to be submitted to HMRC in the correct format.
If your business hasn't already started preparing for the changes to VAT in April 2019, you would be well advised to make a start as soon as possible.