New HMRC notice on Making Tax Digital issued
HMRC issued a new VAT Notice 700/22 on 13 July 2018 re Making Tax Digital for VAT.
In this they gave more details as to how MTD will be implemented, along with a list of 18 software providers with MTD ready products.
The notice provides more details with regard to what will be required under the new digital record keeping rules for the businesses that MTD applies to.
Any business that wishes to claim exemption from MTD on the grounds of religion, insolvency or because they feel it is not practical for them to use digital software will be required to contact HMRC and either obtain their approval for exemption, or receive "digital assistance" from them.
Hence, it is fair to say that if your annual VATable turnover in any 12 month period will exceed the VAT registration threshold (currently £85,000), then the business will have to comply with the new legislation.
The main points outlined in the notice are :
Information required to enable completion of a VAT return must be kept in a digital format within functional compatible software. The business does not have to keep a digital image of each purchase invoice.
The business will be expected to record the date of supply, the value of the supply (net values excluding VAT), and the rate of VAT charged. The business will not have to record the amount of VAT charged, as the software used will presumably calculate this.
For each purchase which is relevant to the VAT return the business must also digitally record the date, value and amount of input tax that the business will claim.
The notice includes a link to 18 software companies that currently have MTD compliant software available.
The notice states that spreadsheets will only be acceptable if used with software that has a digital link to the spreadsheet. "Cut and Paste" will not constitute a digital link. It defines that a digital link is an electronic or digital transfer or exchange of data between software programs, products or applications.
Some permanent information will also recorded digitally, such as the name, address, VAT number and any VAT accounting scheme used.
Making Tax Digital is fast approaching and it is important that your business is prepared and ready for this important change that comes in as from 01 April 2019.
Whilst this is still 8 months away, any business affected will need to be proficient in using whatever software they decide upon, or have made suitable arrangements with an external provider to maintain their digital records for them by this date.