IGA News

Making Tax Digital for VAT starts today

Making Tax Digital for VAT starts today

29 March 2019

Making Tax Digital for VAT comes into effect today, but estimates suggest that 1.13 million businesses still haven’t signed up to the initiative.

If you still need to sign up and find compatible software, here is everything you need to know, and steps you need to follow:

Does MTD apply to my business?

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.

Sign up for Making Tax Digital for VAT

You must sign up for Making Tax Digital for VAT at least one week before your VAT Return is due.

Before you sign up you should have compatible software in place, and your VAT number, Government Gateway user ID and password to hand.

Once completed, you’ll receive an email within 72 hours to confirm that you can submit returns using software that’s compatible with Making Tax Digital for VAT.

After you’ve signed up, you cannot use VAT online services to send VAT Returns.

MTD-compatible software

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.

HMRC has published details of the VAT and Income Tax software currently available for MTD here.

The Garage Guide to Making Tax Digital for VAT

The IGA have produced a “Garage Guide to Making Tax Digital for VAT” for members, which you should have recently received in the post. 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. If you have not received yours or need further assistance, you can call the member helpline

All the information you need, including a step-by-step guide for businesses, can also be found on the Gov.uk website here.

If you have any further queries, please call the direct member helpline or 0845 305 4230.