MTD is something that all businesses and individuals earning money over and above the VAT threshold need to know about and be using. It is not there just to help business, it is being introduced as a mandatory requirement in law.
So, any organisation running a business with a taxable turnover exceeding the VAT registration threshold (which today stands at £85,000) must keep VAT business records in a digital manner. Moreover, all VAT returns sent to Her Majesty’s Revenues and Customs department (HMRC) must be submitted in a digital format using compatible software.
Compatible software includes all systems created by firms with HMRC approved platforms that will help businesses to run and submit its VAT returns. The deadline for when this software must commence is 1st April 2019.
The pilot scheme for MTD (Making Tax Digital) began in April 2018. This means many firms are already running VAT submissions digitally in readiness for the mandatory go-live date in April 2019.
On the face of it, it does sound like a necessary evil and an inconvenience, but it actually isn’t going to be half as bad as all that. The hard work – in building the compatible software – has already been done.
Businesses that are to become MTD for VAT compliant should not fear having to radically change their accounting formats or create new spreadsheets. The software has been completed and approved by HMRC representatives. It just needs to be implemented with the individual company databases.
The software is user-friendly and packed with handy features like reminders. It can warn you when the VAT submissions are due and it can life so much easier for taxpayers to get the returns correct and in order.
Even businesses that are not eligible to go live on April 1st can benefit from the implementation of MTD for VAT. It is especially handy for businesses that do not meet the threshold yet but might do so at some time in the future. As for when the day comes that the business does then exceed the £85,000 threshold, it can hit the ground running.
There will be some exceptions on the implementation date. Companies that trade with the EU, overseas traders and those companies that have never submitted a VAT return before can wait until October 1st 2019 before it becomes mandatory to use MTD for VAT. The important thing to bear in mind is that MTD is there to assist business.