The issue of VAT is currently at the fore of the government’s Making Tax Digital (MTD) initiative. Here we provide an overview of the latest position.
After concerns were raised by experts the implementation of MTD for Business (MTDfB) has been deferred by a year. This means that from 1 April 2019 only businesses with turnover above the VAT threshold (currently £85,000) will have to keep digital records for VAT purposes and provide their VAT return information to HMRC using MTD software.
The government has confirmed that keeping digital records and making quarterly updates will not be made mandatory for taxes other than VAT before April 2020.
Keeping digital records
As the proposals stand, businesses will be required to submit summary totals of their digital records to HMRC at least every three months. In addition, with their first quarterly update they must provide certain ‘designatory data’ and any subsequent changes to this data must be included in their next quarterly update.
Businesses will also need to maintain digital records for the VAT account – the audit trail between primary accounting records and the VAT return – including details of the output and input VAT.
The VAT account will need to detail any adjustments made, including correcting errors, claims made for bad debt relief as well as annual adjustments for partial exemption and retail schemes. To simplify this, only the total for each type of adjustment will be required to be kept digitally – and not details of the calculations underlying them. Businesses will need to preserve digital records using MTD compatible software for up to six years.
The government has confirmed that the submission deadlines for income tax and VAT will not be aligned, meaning there will be no changes to the statutory VAT return or payment dates.
As your accountants, we will keep you abreast of the latest announcements relating to MTD. For more information, please contact us.