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MAKING TAX DIGITAL FOR VAT: Headline Sponsor eadline Sponsor
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MAKING TAX DIGITAL
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2018018
WHAT DO HMRC’S

UPDATES MEAN FOR YOU?

Making Tax Digital is the government’s flagship scheme that requires online tax filing and
payment, as well as digital record keeping. All business taxes will be part of the scheme, but
only VAT currently has an actual roll-out date, with the rest following in 2020 at the earliest.

MTD’s impact on businesses large 2020 onwards—so the opportunity (c) receive information from HMRC.
and small is likely to be significant. should be used to switch to
The government says the scheme entirely digital accounting via Q. WHAT’S A DIGITAL LINK IN
will reduce tax errors and therefore software. MTD FOR VAT?
generate £610 million in extra A. This is one of the technical terms
revenue in 2020-21. However, Q. DOES MTD FOR VAT APPLY TO is at the heart of unlocking what
HMRC also emphasises the MY BUSINESS (OR MY CLIENT’S)? HMRC means when it talks about
benefits of digital record keeping A. In simple terms, if your business making tax digital (the other is
for businesses, including real-time (or your client’s business if you’re “digital record“).
record keeping. an accountant) is currently VAT-
Making Tax Digital is the registered with a VAT-eligible It’s actually quite simple. A digital
link is one where data can be
government’s flagship scheme turnover then, yes, MTD for VAT will transferred between different
that requires online tax filing and apply from 1st April 2019 onwards. software or computer systems.
payment, as well as digital record Q. WILL MY BUSINESS’S VAT It also includes formulae in
keeping. All business taxes will be DEADLINES (OR THOSE OF MY spreadsheets as part of the VAT
part of the scheme, but only VAT CLIENTS) CHANGE WITH MTD calculations.
currently has an actual roll-out FOR VAT?
date, with the rest following in Q. IS IT REALLY THE CASE THAT
2020 at the earliest. A. MTD for VAT does not alter MY BUSINESS (OR THAT OF MY
deadlines, nor existing VAT filing CLIENTS) CAN’T USE PAPER-
MTD’s impact on businesses large periods. Most businesses file BASED DOCUMENTS LIKE
and small is likely to be significant. quarterly, with the rest filing INVOICES, OR CREATE NOTES
The government says the scheme either monthly (typically very WHILE VISITING CLIENTS?
will reduce tax errors and therefore small businesses) or weekly (larger
generate £610 million in extra businesses). The only difference You need to digitally keep and
revenue in 2020-21. However, is that the filing process must preserve information relating to
HMRC also emphasises the now be done digitally, complete VAT, and file VAT returns digitally
benefits of digital record keeping with digital record keeping and using compatible software.
for businesses, including real-time preservation.
record keeping. This doesn’t stop you creating
Q. CAN MY BUSINESS (OR paper-based notes or invoices,
Three resources have been CLIENT) CONTINUE TO USE A but the invoice level data must
published by HMRC on its website SPREADSHEET FOR VAT FILING be transferred into your MTD-
www.hmrc.gov.uk AND RECORD KEEPING WITH compatible software at some
Many businesses, accountants MTD FOR VAT? point. For example, it will no
longer be legal to simply enter the
and bookkeepers have questions A. For a variety of reasons, a monthly total of all invoices into
about MTD for VAT and, thanks to spreadsheet by itself is unlikely to your digital software.
the improved clarity from HMRC, meet all the requirements when it
we’re now able to answer these. comes to MTD for VAT (or indeed Q. WHAT’S THE MTD FOR VAT
We’ve tried to keep accounting MTD for any other kind of business “SOFT LANDING” PERIOD?
terminology to a minimum. If tax from 2020 onwards). The term “soft landing” was
you’re a business owner and introduced early in the MTD for
have queries then speak to your Theresa Middleton, director of MTD VAT discussions and the meaning
accountant or HMRC. for Business at HMRC, confirmed has changed over time so it’s
this to Sage Advice:
Q. HOW DOES MTD FOR VAT important to understand the legal
AFFECT MY BUSINESS (OR MY “The strong advice I’m giving to meaning which is defined in the
CLIENTS) AND WHAT WILL I people is: If you’re an accountant VAT Notice.
HAVE TO DO? and you’ve got new clients joining,
or you’re newly setting yourself up During the first 12 months, HMRC
A. As of 1 April 2019, VAT-registered in business, you should probably will accept cut and paste of data
businesses with a taxable turnover go digital first rather than use a (or copy and paste) as a digital
above the VAT threshold will need spreadsheet.” link. However, even though this is
to: done solely via a computer, it’s not
Q. IF MY BUSINESS SHOULDN’T automated, so isn’t considered a
(a) Keep and preserve their VAT USE SPREADSHEETS, WHAT digital link as defined by the MTD
records digitally; SOFTWARE or TECHNOLOGY DO I for VAT regulations. This is the case
(b) Send VAT returns to HMRC NEED FOR MTD FOR VAT? even if you’re cutting or copying
using MTD-compatible software HMRC says you need software (or and pasting within the same
(referred to as “functional a set of programs) that can do the software program.
compatible software” in the VAT following as a minimum: Q. DOES MTD FOR VAT APPLY TO
Notice). ALL VAT SCHEMES?
(a) records and preserves digital
Essentially, most businesses will records relating to VAT A. There are many VAT schemes
need to switch to using software and some (like the Flat Rate
for their VAT accounting, at least, (b) send to HMRC information Scheme) are more common than
although MTD is virtually certain and returns from data held in the others. VAT Notice 700/22 explains
for other types of business taxes, above digital records what details must be recorded
such as corporation tax, from

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