Are you prepared for ‘Making Tax Digital’
What is ‘Making Tax Digital’?
Making Tax Digital (MTD) is a move by the UK government to introduce a modern streamlined tax system that makes it easier for businesses and individuals to keep their tax records up to date and to transfer information to HM Revenue & Customs (HMRC).
MTD is HMRC’s policy to move all business-related tax reporting online. The Finance Act 2017 which was published on 13th September 2017, is the legal framework for Making Tax Digital for VAT. This legal requirement comes into effect from 6th April 2019.
What do you need to do?
At a high level, the requirements are that from 1st April 2019, businesses with a turnover above the VAT threshold (currently £85,000) will have to:
- Keep records digitally (for VAT purposes only)
- Provide VAT return information to HMRC via an API through ‘MTD functional compatible software or a set of compatible software programs’
- No change to current nine box VAT return
- Records can be stored in one or more software programs that can connect to the HMRC via the published API
- This includes calculating and keeping VAT records in accounting software, and using spreadsheet/bridging software to consolidate, format and transmit VAT return. Linkages must be digital
- VAT return must be submitted via the API for tax periods after 1st April 2019. However, HMRC has confirmed a ‘soft landing’ period to 31st March 2020 when HMRC will not impose any penalties. Which will allow organisations time to implement API linkages
This means that from April 2019, all businesses will be required to make, preserve and then submit existing VAT records electronically. To meet the submission obligation, you will be required to connect to HMRC’s system using an approved application programming interface (API).
Is your business covered?
The Oracle and SAP strategy teams are still reviewing this initiative and have only released limited information on what this means for their customers.
Here at Support Revolution, we have already informed our customers what is required to meet this new requirement, which will be a reporting solution to submit VAT digitally. This process is very similar to the Real Time Information currently submitted for Pay As You Earn (PAYE). Our MTD reporting solution will be available for our customers to test this month (November 2018).