The current hot topic
Making Tax Digital for VAT
HMRC is phasing in its landmark Making Tax Digital (MTD) regime, which will ultimately require taxpayers to move to a fully digital tax system. The first area to be affected by MTD will be VAT with the new rules being implemented from April 2019.
Under the regulations, businesses with taxable turnover above the VAT threshold (currently £85,000) must keep digital records for VAT purposes and provide their VAT return information to HMRC using ‘functional compatible software’. These new regulations take effect for VAT return periods beginning on or after 1 April 2019.
HMRC has published VAT Notice 700/22: Making Tax Digital for VAT. This Notice defines ‘functional compatible software’ and the transaction-level data that needs to be recorded and retained within the software.
Under the new MTD regulations, businesses will have to use ‘functional compatible software’. This means a ‘software program or set of compatible software programs which can connect to HMRC systems via an Application Programming Interface (API)’. This must be capable of:
- keeping records in digital form as specified by the new rules
- preserving digital records in digital form
- creating a VAT return from the digital records held in compatible software and submitting this data to HMRC digitally
- providing HMRC with VAT data on a voluntary basis
- receiving, via the API platform, information from HMRC to ascertain compliance.
MTDfV is coming soon and we are here to help you prepare.