MTD for VAT

Making tax digital will happen, it hasn’t been derailed by the delay announced in July 2017. VAT registered businesses (with some exceptions) need to prepare to meet their MTD reporting obligations for VAT periods beginning on and after 1 April 2019.

From that point the business will need to submit the nine figures, which are currently reported on the VAT return, to HMRC using functional MTD-compatible software. That software could be as simple as an add-on to a spreadsheet, which takes totals from specified columns and transmits them via an API to HMRC’s systems. A more complex solution would be to record all VAT related transactions in a MTD-compatible software package, and use that software to report the VAT figures to HMRC.

HMRC has confirmed that recording transactions in a spreadsheet will meet the requirement for keeping digital records, as we outlined in our newsletter on 12 October 2017. It also appears that almost any combination of software and spreadsheets will be permitted, as long as the final stage of submitting figures to HMRC is done via software and not with human fingers typing into the online VAT return form.

As most businesses don’t want to change accounting software part way through their accounting period, they need to decide what MTD-compatible software they will use at least a year in advance of the April to June 2019 quarter. The snag is; MTD for VAT software doesn’t exist yet, because HMRC hasn’t released the APIs (keys to the electronic doorway), which will allow the VAT data to pass into their systems.

To help test the MTD for VAT system HMRC is inviting businesses to apply to join a pilot program which will start in April 2018, but for that they will need some MTD-compatible software.

 

Written by the Tax Advice Network