Are you prepared for Making Tax Digital?

What is Making Tax Digital?

Making Tax Digital (MTD) is an initiative by the UK government to introduce a modern tax system. It should make it easier for businesses to keep their tax records up to date, and also 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, published on 13 September 2017, is the legal framework for MTD for VAT. This legal requirement comes into effect from 6 April 2019.

What do you need to do?

Here are the requirements for businesses with a turnover above the VAT threshold (currently £85,000).

  • Keep records digitally (for VAT purposes only).
  • Provide VAT return 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.
  • Store records in one or more software programs that can also connect to the HMRC via the published API.
  • Calculate and keep VAT records in accounting software.
  • Use spreadsheet/bridging software to consolidate, format, and transmit VAT return.
  • Make sure linkages are digital.
  • Submit VAT return via the API for tax periods after 1 April 2019, but HMRC has confirmed a ‘soft landing’ period until 31 March 2020 when it will not impose any penalties allowing organisations time to implement API linkages.

This means that from April 2019, all businesses need to make, preserve, and also submit existing VAT records electronically. To meet the submission obligation, 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. They have released limited information on what this means for their customers.

Here at Support Revolution, we have already informed our customers on what is needed 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). Also, our MTD reporting solution will be available for our customers to test this month (November 2018).

The detailed guidance from HMRC can be found here.

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