Making Tax Digital – VAT

As any business owner is aware from April 2019, Making Tax Digital (MTD) is coming into effect. You will have seen accounting software try and sell MTD compliant software to you on the TV, your accountant has probably sent you a letter to advise you on it and without a doubt you would have received a letter from HMRC.

Firstly, do you know if Making Tax Digital is applicable to you? At the moment, businesses who are over the VAT threshold of a taxable turnover of £85,000 are expected to sign onto MTD. Businesses who are below the threshold, do not need to sign up and can continue to complete their VAT returns as they usually do. Please note, that this threshold includes sole traders. If you are a sole trader whose taxable income is over £85,000 then you need to be registered for VAT and MTD will include you.

Signing up for MTD is easy, all you need is your Government Gateway log in and your VAT number. You will need to have MTD compliant software prior to signing up. Please note, you will not be automatically transferred over to MTD when it goes live in April 2019. You or your agent will need to manually sign up – the irony.

Deferred Group

As it stands, MTD has been deferred for 6 months (October 2019) for a certain group of businesses. This applies to the following groups:

  • Trusts
  • ‘Not for profit’ organisations that are not set up as a company
  • VAT divisions
  • VAT groups
  • Public sector entities required to provide additional information (Government departments & NHS Trusts)
  • Local authorities
  • Public corporations
  • Traders based overseas
  • Those required to make payments on account
  • Annual accounting scheme users

HMRC has recently stated that every business who is in the deferred group have been sent a notice of this. The only way you can be certain of being part of the deferred group is that letter from HMRC. If you have received a letter and your circumstances have changed since, meaning you no longer fall into one of these categories: don’t panic. HMRC have stated that they will honour the letters sent out. So, if you are in the deferred group, then you’re in.

Is your software Making Tax Digital compliant?

This needs to be checked. Some accounting software have stated that they would not be updating to become MTD compliant – probably an unwise decision if they are UK based. However, HMRC are not recommending any software and have produced a list of software providers who are MTD compliant. This does not mean they do everything; some software does not account for the Flat Rate Scheme and so on. If you are unsure of whether your software is compatible, ask your provider.

As April draws closer, many people are beginning to worry that they are not MTD compliant and may find the idea of getting ready for it completely overwhelming. No need to worry, many people are closer to being compliant then they realise. However, if you are unsure of how to proceed, please do not hesitate to contact us directly.