Maxing Tax Digital – gone but not forgotten

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Back in July of this year, the government announced that the introduction of Making Tax Digital (MTD) would be delayed and will now only be mandatory for VAT from April 2019. This was in response to concerns raised by businesses, MPs and professional bodies. 

 

The Revised timetable

·        April 2019: Digital records only required for VAT to start with for return periods commencing on or after 1 April 2019.

·        April 2020 onwards: This is the earliest date that businesses will be required to keep digital records and make quarterly reports for other taxes, such as income tax and corporation tax.

·        For businesses whose turnover falls below the VAT threshold they will be able to join MTD voluntarily, and for other taxes 

 

VAT reporting

Many businesses already make quarterly VAT returns, so the transition to MTD should be simple enough, shouldn’t it? That would be too simplistic a view as many businesses face the challenge of moving to digital record keeping and making quarterly reports directly from those records, which could be very different from the way they do things now.

The majority of VAT returns are filed online, 99% in fact, but only approximately 12% are filed via software. The remainder would appear to be filed using HMRC’s government gateway page and therefore requiring some manual involvement. Under MTD, however, VAT returns are to be filed directly via software and so it will no longer be possible to type the figures into the HMRC portal.   

Manual records will become a thing of the past and anyone using spreadsheets as part of their VAT record keeping can still do so but those spreadsheets will need to be able to interact with software to ensure that the requirements of MTD are met.

Later this year there is to be a private beta test of MTD, which will then open up into wider public testing in Spring 2018.

The introduction of MTD for VAT coincides with the UK leaving the European Union, and it is likely that VAT and Customs Duty will be significantly affected. Businesses who trade with the EU will suffer the double headache of MTD and understanding the changes to the rules for the VAT treatment of transactions between the UK and EU.

 

Corporation tax

As many companies will be involved with MTD from April 2019, because they are likely to be VAT registered, they will need to ensure that the accounting systems they employ for MTD for VAT will also be compatible with the requirements for corporation tax in readiness for the following year.

 

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