We have answered some of the questions you will be likely to have on MTD below. If you would like to contact us to ask us anything, please feel free to.
VAT Threshold – The VAT threshold is currently £85,000. It is likely to remain the same at April 2019. More info here.
Q) I currently use spreadsheets to prepare my VAT returns. What should I do?
A) You will need to consider which software you are going to use to prepare your VAT returns and submit them to HMRC from April 2019. We can assist with getting your business set up on software that will comply with the rules from April 2019. FAQ 8 has more information.
Q) I am VAT registered but under the VAT threshold. Will I need to file my VAT returns through compatible software from April 2019 or will I still be able to do this online?
A) As we understand, for businesses under the VAT threshold at April 2019, it will not be compulsory from April 2019, to file VAT returns through software to HMRC and we believe it will still be possible to file the return figures online to HMRC, as has been done previously, until April 2020.
Q) What happens if I am over the threshold at April 2019, and therefore go in to making tax digital, but subsequently, my turnover goes under the VAT threshold?
A) If you begin reporting your VAT returns through software due to being over the VAT threshold at April 2019, and your turnover then drops below the threshold, if you remain VAT registered, you will need to continue to submit your VAT returns through software. If you deregister your business for VAT, due to the turnover dropping below the threshold, then you will not be required to report VAT return figures to HMRC through software, until the next date for all business (2020 or later if delayed) comes in to effect.
Q) Are there any penalties or new penalties for submission of VAT returns April 2019?
A) As far as we know, the penalty regime for late submission or payment of VAT from April 2019 to April 2020, will remain the same is it is currently.
Q) When will I first have to submit a VAT return through software?
A) If your business is currently over the VAT threshold and remains over the VAT threshold at April 2019, then the first VAT return that commences on or after 1 April 2019, will need to be submitted to HMRC through software.
Q) My VAT quarters are April, July, October, and January. When will the first VAT return need to be submitted through software?
A) The first return that will need to be submitted through software, will be the July 2019 return.
Q) What is compatible software?
A) We understand that HMRC are currently testing with a number of software providers and are planning to produce a list of software providers that they know will be able to comply with the new legislation. We are expecting that to be released in summer. We would also expect that the larger software providers, such as QuickBooks, Xero, Sage, and Freeagent will all be sufficient to comply with the legislation, because they will need to be!
Q) I use spreadsheets currently to prepare VAT returns, what can I do?
A) There are a number of software platforms that may be able to produce the necessary information and reports needed by HMRC from April 2019 from spreadsheets. This will mean using specified spreadsheet templates, so that bridging software can be used to take the transactions from the software to submit the information to HMRC. We are unsure currently exactly how this will work and how easy to use the template software will be. Our advice, would be to start looking at other providers, such as QuickBooks and Xero, and to look at the free trials. We believe, it may be easier and more time efficient to do this rather than continuing to use spreadsheets.
Q) Does this mean I will need to start attaching all my invoices to the software transactions and HMRC will be able to see them all?
A) From the information that we have, we believe that HMRC will only be able to see the summary VAT return figures from the submissions (the VAT due, sales VAT, purchase VAT, and net figures). There will not be a requirement from April 2019, to start attaching invoices and receipts to all the transactions in the software.
Q) Can I just enter the total figures from my spreadsheet in to the software and then submit the VAT return?
A) Although HMRC will only see the summary figures from each VAT return from April 2019, there is a requirement to record all of the necessary transactions in the period to show the date of the invoice, date of the supply, the net amount, the VAT charged and rate of VAT, and the gross amount for all the transactions in the quarter. There will be some exceptions for transactions such as, including the fuel scale charge for private use of a car, or applying the partial exemption VAT rules.
Q) I use Sage desktop to do my bookkeeping currently. Will I be able to use it to submit my VAT returns to HMRC or will I have to change software provider?
A) If you use Sage desktop, based on the information we have, you will be able to submit VAT returns from April 2019 through the software to HMRC. You will however need to make sure that you are using V24.1 of the software, as older versions will not comply with Making Tax Digital. Some Sage desktop users will be able to update for free, but if you are unsure, you can call Sage and give them your account number to check this.