Deadline is only a year away, does your accounting system comply with Making Tax Digital for VAT?
Making Tax Digital (MTD) for VAT is scheduled to start in April 2019 which means that your VAT information needs to be submitted to HMRC digitally.
On 18th December 2017, HMRC published draft legislation together with examples of how the business account records might link with the HMRC computer in order to comply with MTD for VAT. The legislation specifies that ‘functional compatible software’ must be used to record and preserve prescribed VAT related data.
What are Digital Records?
‘Functional compatible software’ must be used to calculate the VAT due, report the VAT figures (as per current VAT return) to HMRC, and to receive information back to HMRC.
VAT related data for each sale and purchase made by the business includes the time of the supply, the value and the rate of VAT charged, or in the case of purchases, the amount of input VAT allowed.
There is no requirement in the draft regulations that the electronic recording of this date must be done at the time the supply is made, or when the purchase is received. As long as the data is recorded electronically by the earlier of the date that the VAT return must be submitted, or is actually submitted.
Digital Links in the Trail
The business can use more than one piece of software to keep it’s digital records, but those separate software programmes must be ‘digitally linked’. HMRC provides examples of what it means by digitally linked in the draft notice.
One example is a business which uses one piece of accounting software to record all sales and purchases, this software then calculates the return and submits it to HMRC. As well as the records in the accounting software the business uses a spreadsheet to keep track of a fleet of cars and work out it’s road fuel scale charge. The draft guidance suggests that the business can type the adjustment into it’s accounting software.
We can of course work with you to make sure that your accounting systems will comply with the new VAT rules before they start in 2019. Note that MTD for VAT will not be mandatory where turnover is below the VAT registration limit, currently £85,000 per annum.
We are big advocates of a programme called Xero, which we use for our own accounting, contact us for a demonstration.
Office: 0118 923 5800