How do I get my VAT-registered business ready for Making Tax Digital?

VAT registered businesses with a taxable turnover above the VAT threshold (£85,000) will be mandated to keep digital VAT records and send returns using Making Tax Digital (MTD) compatible software from April 2019.

What does this mean for my business?

From April 2019, affected businesses will no longer be able to submit their VAT returns through the government gateway. Business will be required to use MTD-compatible software which prepares a VAT return and sends it to HMRC. To be MTD-compatible, the software must integrate with HMRC systems to send VAT returns to HMRC.

MTD-compatible software

HMRC is working with more than 150 software suppliers who have said they’ll provide software for Making Tax Digital for VAT in time for April 2019.

Of these, software suppliers who have tested their products in HMRC’s test environment and have already demonstrated a prototype of their software to HMRC have been approved under MTD for VAT. These software suppliers are:

  • Accu-Man
  • Ajaacts
  • BTCSoftware
  • Bx
  • Clear Books plc
  • DTracks Limited
  • eFileReady
  • Farmplan
  • FreeAgent
  • GoSimple Software
  • Intuit – QuickBooks
  • IRIS
  • Landmark Systems Ltd
  • Liquid Accounts
  • Quickfile Accounting Software
  • Sage (UK) Limited
  • Simplifi-HQ Limited
  • Tax Automation Limited
  • Tax Optimiser
  • Xero
  • Zoho Books

HMRC will update this list as testing progresses and updates can be found on their website.

I already use software, but my supplier is not listed

MTD for VAT is a project where developments are ongoing. If your software supplier is not listed above, this does not necessarily mean your software will not be compliant. It just means that the supplier did not participate in the initial pilot.

We recommend as a first step that you speak with your software supplier directly and ask them to check if they’ll be supplying suitable software for 1 April 2019. The likelihood is they will be and so it’s business as usual for you.

I currently use excel spreadsheets to maintain my records

HMRC permits the use of Excel spreadsheets provided it is used in conjunction with software that is capable of taking the relevant information from the spreadsheet electronically and sending it to HMRC.

For many clients, investing in software in order to continue using spreadsheets may be neither cost effective nor desirable. The good news is that MHA MacIntyre Hudson is undergoing a digital upgrade in its own systems and so we can act as the software intermediary for our clients that want to continue to maintain records in Excel. Our clients will be able to continue keeping their books as they currently do, simply supplying us with the spreadsheets so that we will make the digital submission on their behalf.

So, if your business falls into this category, it’s pretty much business as usual as well!

I currently maintain my records manually

Manual records will no longer be acceptable to HMRC from 1 April 2019. You will need to make a decision as to which software (including Excel) is suitable for your business. Please get in touch with your local MHA MacIntyre Hudson adviser to discuss your options.

We advise swift action if your business falls into this category. It will not be desirable to switch to software mid-way through an accounting period in order to be MTD compliant. Switching at the start of the accounting period beginning immediately preceding 1 April 2019 will ensure a much smoother transition, so please speak to us as soon as possible.

Exemptions from MTD for VAT

There are a small number of VAT-registered business that will be exempt from submitting VAT returns digitally and will be able to continue using the government gateway. They are as follows:

VAT-registered businesses with taxable turnover that has never exceeded the VAT registration threshold (currently £85,000). But, you will need to keep an eye on your taxable turnover, especially if you think it is close to the VAT registration threshold;

Your business is run entirely by practicing members of a religious society whose beliefs are incompatible with the requirements of the regulations (for example, those religious beliefs prevent them from using computers);

It is not reasonably practicable for you to use digital tools to keep your business records or submit your returns, for reasons of age, disability, remoteness of location or for any other reason;

You are subject to an insolvency procedure.

This blog first appeared on one of our member firms, Macintyre Hudson.