Making Tax Digital is the HMRC initiative to bring business record keeping into the digital era. More people own and use smart phones to complete a number of day to day tasks, so HMRC have embarked on an initiative to make digital record keeping by businesses, the norm also. HMRC also hopes to decrease the number of errors that businesses make on their VAT returns by simplifying the VAT return process and have invested in a number of various digital resources to help educate and guide businesses through these changes.
From the 1st of April 2019, any VAT registered business which is currently trading above the £85,000 VAT threshold (ie is not registered for VAT voluntarily) must be subscribed for Making Tax Digital services with HMRC. This will be legally mandated unless you meet one of the special exemptions which a very small percentage of businesses will be eligible for.
The VAT returns for these businesses may not be submitted any longer through the HMRC online software, which is most commonly used. The VAT returns must be submitted via a HMRC approved API software. Accountants can do this on their clients behalf but must get authorisation first from the client via the new Making Tax Digital program (this will be done via email, replacing the paper authorisation 64-8 form).
New information I received from the HMRC talk given at the Institute of Financial Accountants (Brentwood Branch) talk this evening, was that if your trade falls below the £85,000 threshold and you remain VAT registered, you are not able to leave the Making Tax Digital scheme.
Businesses can keep records via spreadsheet but there are set information from paper records that must be kept electronically. If you issue paper invoice for example, you will need to take the next step of keying in set data from these invoices, that can then be used to digitally complete the VAT return.
Digital records must be created as close to real time as possible, so if you are have been thinking about moving to cloud accounting for example, this is the time of the year to start looking at this.
For many VAT registered businesses who currently keep their records electronically, there will be little change. However, there are many business still using record books as the basis of their accounting record keeping, which will need to move to digital methods this year, in order to be ready for the 1st of April 2019. To read the current draft VAT notice (as of March 2018) please clink on this link.
Here at KFH Accounting, we are working with all our VAT registered clients and have already spoken with at depth, with those who do keep manual records about how we can look to make their transition to digital records smooth.
If you are looking for a friendly, proactive team of accountants that can help your business be Making Tax Digital compliant well before the 1st of April 2019 deadline, please do give us a call. We have a variety of packages that can be adapted for your tax compliance needs.