Making Tax Digital – Software Guidelines
HMRC’s Making Tax Digital (MTD) initiative for VAT transactions comes into force from April 2019. HMRC has now published its detailed guidance to help businesses ensure they are compliant, in time for the introduction.
The new rules apply to all businesses that are registered for VAT and those that have ever had a taxable income above the VAT threshold i.e. have had to complete a VAT return at any time. There are very few exemptions and the rules will become law on 1st April 2019.
Businesses will need to be ready to comply with the new rules from the start of their first VAT quarter which commences on or after 1st April 2019. We would strongly recommend not leaving it until the last minute, as if you need to change record keeping/accounting systems, this is not always a simple and straight forward activity.
Whilst we are confident that the ‘major players’ in the software market e.g. Sage and Xero will be fully compliant, we would recommend that any clients that fall into the following categories, contact us as a priority to assess options and start planning now:
- Those using manual books/spreadsheets
- Those that have deregistered for VAT
- Those using legacy accounting systems
- Those with a taxable turnover approaching the current VAT registration threshold of £85,000
With the UK Treasury currently reviewing the outcomes of a consultation on lowering the VAT threshold to around £20,000 of taxable turnover, Making Tax Digital will likely become a requirement of nearly all businesses in the near future and so it is worth all clients becoming familiar with the regulations.