BDHC’s guide to Making Tax Digital (MTD) for VAT

On 1^st April 2019, Making Tax Digital for VAT (MTD for VAT) comes into force for VAT registered businesses with taxable turnover over £85,000 (the compulsory registration threshold). Those businesses will need to keep their records digitally, and submit all future VAT return data to HMRC using MTD-Compatible software.

On the face of it the requirements seem simple enough, and a lot of businesses have simply made the move to online accounting packages such as Xero, which essentially take care of most things MTD related.

However, a recent survey indicates that a lot of SME decision makers are still unprepared for this move, which could be cause for concern at this late stage, but lots of help is readily available online.

Do I need Xero?

Absolutely not! Xero is just one of many online accounting software providers out there – we are Xero Partners as you can tell from our website, and find it very user friendly, with many clients giving us similar feedback, but there are lots of others out there which are MTD Compatible

Do I need Online Accounting Software?

Again, absolutely not! As long as each individual transaction (not a summary) is recorded and stored digitally, e.g. spreadsheets, then there is no need to change things. Further information about which records need to be kept digitally can be found on the HMRC website.

HMRC have agreed that spreadsheets are ok, and so you will just need a type of “Bridging Software” which essentially transports the figures from your spreadsheets to HMRC via the MTD portal. There are lots of providers out there, such as Absolute which can work with your excel documents to ensure that you are compliant

Digital Records, check! What's next?

The next thing you need to do is to sign up to MTD with HMRC. Now, this next step varies slightly, depending on whether you are completing your own VAT returns (using your businesses online login details) or whether you have an agent completing them for you, so make sure you follow the correct link!

We would advise that you have completed your last non MTD VAT return before you complete this step, to ensure that you don't have to implement MTD before you are ready – the last non MTD VAT return is 31/03/2019, so as long as the next VAT return you need to complete ends after this date then you're good to go:

If you're completing your own returns, follow this link:

https://www.tax.service.gov.uk/vat-through-software/sign-up/have-software

If your agent is completing your returns, you do not need to do anything, but they will need to follow points 3 to 5 on this link:

https://www.gov.uk/guidance/making-tax-digital-for-vat-as-an-agent-step-by-step#clients

Either you or your agent will get an email from HMRC confirming that you have been signed up to the new MTD service, within 72 hours of signing up via the above links

So, now I'm ready to go?

Almost! The next thing you need to do is to ensure that your software is MTD ready and that you have given it authorisation to “speak with HMRC”. You might have to activate a link or similar from within the software, and you may get a prompt when you go onto the VAT return within the software. You will need to have your HMRC online login details handy as these will need to be entered to complete the link.

Those of you using Xero will know that this is now MTD ready, and you just need to follow the links for the new VAT return page.

If your agent deals with your VAT returns, then they will have to do a similar thing from within their online accounting software.

If you or your agent are using bridging software then you will have to go through a similar authorisation process the first time you use the software, but all of this detail should be within the initial instructions received.

Hopefully you now feel a bit more confident about getting your business MTD ready, but as ever, please feel free to get in touch with any queries!