With very limited exceptions, from 1 April 2019 if your business has taxable turnover in excess of £85k, you must sign up to Making Tax Digital (MTD) for VAT.
1 April 2019 – VAT returns must be submitted to HMRC digitally
1 April 2019 – Business records must be maintained in a digital format (software/spreadsheets)
1 April 2020 – Digital links must be in place between different types of software
Action to Take Now
If MTD applies to your business, check that your software is MTD compliant and ensure that VAT report data complies with the rules.
If your business already meets the MTD requirements, consider signing up to the MTD pilot, but note that once you have signed up, you must stay in the MTD regime and the HMRC portal will close. The HMRC portal is currently used by businesses to type in the figures for boxes one to nine of the VAT return. Sign up to the pilot here: https://www.tax.service.gov.uk/vat-through-software/sign-up/have-software.
Businesses that pay VAT by direct debit cannot sign up within 15 working days before or 5 working days after the due date for the return, so timing is fundamental. Once signed up, HMRC will send a confirmation email within 72 hours. As a business cannot submit a VAT return digitally until the confirmation email has been received, enrol at least 3 days before, or earlier if pay by direct debit.
Example if don’t pay VAT by direct debit: Submit the March 2019 VAT return as normal. For the June 2019 VAT quarter, sign up to MTD between 8 May 2019 (the day after the March 2019 VAT return filing deadline) and 4 August 2019 (3 days before the June 2019 VAT return filing deadline, to make sure that the HMRC confirmation email is received).
Example if do pay VAT by direct debit: Submit the March 2019 VAT return as normal. For the June 2019 VAT quarter, sign up to MTD between 15 May 2019 (being 5 working days after the March 2019 VAT return filing deadline) and 17 July 2019 (being 15 working days before the June 2019 VAT return filing deadline).
When MTD becomes mandatory, enrol into MTD by following the same process outlined above (signing up to the pilot). Once enrolled, the HMRC portal will close.
Important: You must enrol your business into MTD – it is NOT automatic. Please therefore enrol into MTD in sufficient time to submit the VAT return.
If your business does not sign up for MTD when mandatory, HMRC could impose financial penalties. The risk of being issued a penalty is greater if only limited action has been taken to comply.
HMRC also intends to roll out MTD for income tax from April 2020 which will affect the self-employed, those who receive income from property, partnerships and trusts. MTD for income tax will require quarterly reporting of income and expenditure and keeping digital records.
If you have any queries, please email us at MTD@kilsbywilliams.com.