Making Tax Digital: Separating fact from fiction

HMRC has started sending letters to all VAT registered businesses to inform them about Making Tax Digital for VAT which starts on 1 April 2019.

By Margaret Scott, online services manager, Pierce

There are many myths regarding Making Tax Digital for VAT, so to help businesses cut through the noise, I have addressed some of the most common misconceptions below:

Fiction: MTD for VAT and for self-assessment tax returns is being delayed.

Fact: MTD for VAT is not being delayed. If you run a VAT-registered business with a taxable turnover above the VAT registration threshold (currently £85,000) you are required to keep digital VAT business records and send returns using MTD-compatible software. The vast majority of businesses will need to do this for VAT periods starting on or after 1 April 2019.

Fiction: You will need to keep more records under MTD.

Fact: MTD does not require you to keep additional records for VAT, but you must record them digitally. If you already use software to keep your business records, check your software provider’s plans to introduce MTD-compatible software. Check here for the latest software guidance: https://www.gov.uk/guidance/software-for-sending-income-tax-updates

Fiction: The current HMRC gateway will no longer be available.

Fact: This site will remain open for businesses under the threshold that do not want to opt in.

Fiction: HMRC will collect digitally the transactions behind the boxes 1-9.

Fact: There is an obligation to keep your records digitally but the transactions will not be collected automatically by HMRC when you submit MTD for VAT. Boxes 1-9 for the VAT return must be processed digitally for MTD for VAT via software that can link to HMRC.

In conclusion, MTD for VAT is on its way, if you need further advice, consult your accountant for guidance regarding your obligations and software choices.