Making Tax Digital for Business
The government have issued information on how Making Tax Digital for Business (MTDfB) is expected to work for VAT once the rules are introduced in April 2019.
Under the proposed rules, which have been issued subject to consultation, VAT registered businesses with turnover over the VAT registration threshold will be required to submit their VAT return digitally using software. Businesses with a turnover above the VAT threshold (currently £85,000) will have to:
- keep their records digitally (for VAT purposes only) and
- provide their VAT return information to HMRC through Making Tax Digital (MTD) functional compatible software.
This software will either be a software program or set of compatible software programs. They can connect to HMRC systems via an Application Programming Interface (API). The functions of the compatible software include:
- keeping records in a specified digital form
- preserving digital records in a specified digital form
- creating a VAT return from the digital records and providing HMRC with this information digitally
- providing HMRC with VAT data on a voluntary basis and
- receiving information from HMRC via the API platform that the business has complied.
Businesses will need to preserve digital records in the software for up to six years. Further information on the required information can be found in Annex 1
The government will make the final detailed requirements available to the software providers by April 2018. This will allow time for the software to be developed and tested prior to the rules coming into effect from April 2019.
VAT is the first tax to be reportable under MTD and businesses within the scope of MTD will need to keep their records digitally, using approved MTD functional compatible software, from 1 April 2019. The software will create the return from the digital records and this will need to be submitted under MTD for return periods starting on or after 1 April 2019.
We will keep you informed of developments in this area and ensure we are ready to deal with the new requirements.
Please contact us for more information on 0161 456 9666 or visit our website.
Internet link: GOV.UK MTD VAT legislation overview