Don’t Forget: Making Tax Digital is coming! But have no fear, so is our handy Garage Guide
HMRC has now begun sending letters to VAT registered businesses, letting them know about Making Tax Digital.
Only 40% of the businesses who will be required to transition to Making Tax Digital (MTD) next April are aware of it, says a report from the House of Lords economic affairs committee. Furthermore, with the official launch of MTD coming hot on the heels of the nation’s official exit from the EU, smaller businesses are likely to be feeling the heat when it comes to implementing the new systems.
If you are registered for VAT and your taxable turnover is above the threshold, MTD will apply to you.
If your taxable turnover drops below the VAT registration threshold at any point after 1 April 2019 you are still required to continue to keep digital records and send HMRC your VAT returns using MTD-compatible software. This obligation doesn’t apply if you de-register from VAT or if you are exempt from MTD for VAT.
If your business has a taxable turnover below the VAT threshold you can also sign up to MTD voluntarily.
The IGA have now produced a “Garage Guide to Making Tax Digital for VAT” for our members. This includes an introduction to the scheme and how it works, guidance on how to transition before the deadline, a helpful checklist for your business as well as further resources. We will be sending these out to members in the coming weeks – please keep an eye out.
Compatible software is a software product or set of software products that between them support the MTD obligations of keeping digital records and exchanging data digitally with HMRC through the MTD service. If more than one application is being used, data that flows between those applications must also be exchanged digitally, called ‘bridging software’.
Digital records can be kept in a range of compatible digital formats. They do not all have to be held in the same place or on one piece of software. For example, a spreadsheet can be a component of digital record keeping provided the product that consolidates records, or summary records from the spreadsheet, can exchange data digitally with HMRC.
HMRC will give businesses until 31 March 2020 to make sure there are digital links between software products. Before that date, cut and paste will be an acceptable way to transfer information.
VAT-registered businesses are now able to join the MTD pilot, so instead of waiting until next April you can get compatible software now and try the new way of submitting your returns so you’re ready when the changes come in.
, then click the ‘sign up’ button and follow the instructions.
Keep an eye out in the post for our new Garage Guide to Making Tax Digital for VAT, which will be landing later this month. For any further questions or guidance, please call our friendly team on the IGA direct member helpline or 0845 305 4230.