MTD and VAT
Does MTD for VAT affect me?
Do I even need to worry about this?
After the 1st of April 2019, Making Tax Digital for VAT is going to hit almost every UK business with a turnover above the VAT threshold.
There might be some wiggle room in a few rare cases, such as religious exemptions, but basically the point of the system is to get everyone filing their VAT returns under the new system. Even charities and overseas businesses will be affected if they’re registered for UK VAT and above the turnover threshold.
If you’re under the VAT threshold, but signed up for VAT voluntarily, things are a little different. You won’t have to use special MTD software for your VAT records and returns for now. HMRC won’t stop you if you want to give it a whirl, though.
I’m already filing my VAT returns online, aren’t I?
Yes, probably; almost everyone is. However, manually copying and pasting the figures into HMRC’s portal site doesn’t mean you’re following the MTD rulebook.
To get your digital ducks in a row for the new system, your software needs to be able to shoot the information directly to HMRC. That change is causing a lot of hassle for people and businesses, most of whom really aren’t as prepared as they need to be.
Maybe your existing accountant’s even given you a spreadsheet for your VAT records. If you weren’t used to using one, it probably felt like joining the digital revolution at the time. HMRC’s new scheme is looking way beyond basic spreadsheets, though. They want an unbroken “digital chain” linking your software to theirs, and traditional accountants are struggling to keep up.
As a result, a lot of people, and their accountants, don’t understand the kinds of software they’ll need for MTD, or how to use them properly to stay within the new rules.
I’m not registered for UK VAT. Do I need to worry about Making Tax Digital?
Right now, MTD is only for businesses with a turnover above the VAT threshold.
However, it’s only a piece in the overall puzzle HMRC’s putting together. Eventually, and probably quite soon, the taxman’s going to start looking at expanding the scheme into Income Tax. There’s a lot of talk about changing the way people report their earnings and expenses to HMRC, and how often they have to do it.
There are still plenty of details up in the air about all this – but as always, RIFT Accounting’s keeping up to date as things develop.
We're here to help so get in touch whenever you need us.