Making Tax Digital for VAT

Why has the government introduced Making Tax Digital for VAT?

HMRC have issued VAT notice 700 / 22 (Making Tax Digital for VAT) so that accountants and business can efficiently file and preserve records digitally going forward. The modernised process, will comply with the legal requirement of submitting VAT records using software, enhance user-performance, and is set to generate £1 billion in additional revenue by 2023.

Although the public roll-out date isn’t until April next year, all businesses that are VAT registered should be undertaking the correct procedures from now, in order to adequately prepare for the Making Tax Digital for VAT deadline.

Some self-employed businesses and landlords are already going through the technological change, currently implementing accounting software into their bookkeeping as part of a live pilot, to test and develop the Making Tax Digital service for Income Tax. This alternatively prevents organisations from having to file a Self-Assessment tax return form. So, if you’re eligible and aren’t already incorporating software into your services, get a head-start, here.

For all VATable businesses, swapping to accounting software is inevitable. Come April 2019, nine-box paper based VAT return forms and VAT-return submissions via the HMRC VAT portal will become things of the past. See below, for how to get with the times, and prepare for the VAT deadline.

What to know and what to do

The first step to Making Tax Digital for VAT is to find out if your business / your clients businesses are eligible. For some this is pretty straight forward, but for up-coming, fairly new businesses this may not be as clear. If you suspect that you could be eligible, the best thing to do is to begin the switchover process now, to ensure you’re compliant with the new MT. law if applicable.

The law will be active from the first day of your first VAT period, which begins on or after April 1st 2019.

What are the benefits of going Digital?

It’s time effective. Submit VAT returns at the click of a button, using accounting software. Avoid time spent searching, wading through and amending VAT documentation, whereby the final outcome is likely to be invalid, incurring further time wastage.

Submit valid figures. Avoid using multiple, unclear spreadsheets that can incur errors. When inputting data, it is incredibly easy for mistakes to be made, which can lead to fees for submitting incorrect payment information.

Some business owners or accountants will have become so accustomed to using Microsoft Excel, hesitant to hop aboard the accounting software train. Yet the reason that Tax is becoming Digital is to move away from errors and potential data loss, of which are caused by spreadsheets. For instance, if your document goes missing, your computer breaks or your file is corrupted you will lose invaluable data that is no longer accessible – you may have created backup copies, however not everyone does, when there are multiple adaptations of spreadsheets to replicate. HMRC states that “by law, VAT records must be kept and preserved” thus making the spreadsheet process unlikely to meet the requirements when it comes to MTD for VAT – or indeed MTD for any other kind of business tax from 2020 onwards.

If you insist on continuing your arduous battle with the Spreadsheet, then you can run over into the 12 month ‘soft landing’ timeframe, post-April 2019. From April 2020 it will no longer be acceptable for businesses and accountants to copy and paste data from a spreadsheet.

Choose Pandle – Cloud Accountancy Software

Place your trust in us. Using cloud-based accountancy software such as Pandle, helps to eliminate loss of data and data error. Effortlessly upload receipts and import bank feeds to collectively store and protect all data collectively in the cloud.

Our user-friendly software maximises data validity, preventing error of commission and omission – let Pandle do the hard work for you. Our software calculates your VAT, so you can seamlessly submit your returns through a click of a button; simply click “Add new VAT return” to distribute your returns.

Always gain access to your books from any device, whenever, wherever with Pandle.

Know your stuff

HMRC has released official supporting documentation to help businesses get to grips with VAT notice 700 / 22. See supporting links below that will help you on your mission.

Making Tax Digital for Business – Stakeholder Communications Pack
Software Suppliers Supporting Making Tax Digital for VAT – Pandle coming soon
VAT notice – Making Tax Digital for VAT

Exemptions and deferrals from MTD for VAT

The Making Tax Digital VAT deadline is applicable for the majority of businesses however a small percent are exempt. For if individuals cannot adapt to the digital changeover by result of religious beliefs, disabilities or remoteness then they are advised to contact HMRC’s VAT helpline for further instruction. Similarly, this is relevant for insolvency procedures.

Additionally, 3.5% of organisations have a deferred start date for MTD for VAT, meaning their deadline won’t come into effect until October 2019, unlike most eligible businesses. Please see below for an official lists of organisations that have been postponed until October 2019:

• Businesses required to make payments on account
• Annual accounting scheme users
• Trusts
• Not-for-profit organisations that are not set up as a company
• VAT divisions
• VAT groups
• Public sector entities that are required to provide additional information on their VAT return
• Local authorities
• Public corporations
• Traders based overseas

For now, adopting accounting software is only necessary for submitting VAT returns, which isn’t currently relevant for all businesses. However, Making Tax Digital is certain for other types of business taxes such as corporation tax that will begin commencing 2020 and onwards. This means, the sooner you convert and get to grips with accounting software, the better. Save costs on outsourcing human resources and invest in Pandle, where you’ll take control of your accounts independently, confidently and with ease. Invest your newfound time from calculating, inputting and cross-examining data, into your business.

We’re busily working on our latest update to ensure that Pandle is included in the Approved List of Software Providers. We guarantee, our seamless, user-friendly cloud-software, will be accessible for business and accountants to familiarise with, prior to the Making Tax Digital VAT deadline – watch this space.