Are you MTD Ready?
You have four months to go!
The government are making moves to digitise tax compliance processes to increase efficiency and save costs. Chris Pittock, Senior Partner at Hinton Abbott Accountants brings us an overview of what to expect.
Ultimately, the MTD responsibility for this sits with you, therefore you must make sure that your book-keeping will be MTD compliant when the time comes. However, you are not alone – Hinton Abbott Accountants can advise you to ensure you are MTD ready.
If your turnover exceeds £85,000
As from 1 April 2019, you must store your business records in a digital format and use this information to complete your VAT returns.
If your turnover is below £85,000
Initially you may not need to do anything, but check your turnover every month and if the 12 months prior has exceeded the threshold, you must apply MTD from the following month. And under MTD, once in, you stay in. This is the case even if your turnover later drops below the VAT threshold.
What needs to be stored digitally
In most cases MTD for VAT requires that the following information must be stored electronically:
- Details of the VAT registered entity and any applicable schemes (Flat Rate for example).
- For each VAT accounting period you must also give information electronically on:
- The time, value of any supplies made, and the rate of VAT charged.
- The time, value and total input tax paid on taxable supplies purchased.
- A summary of the VAT exclusive outputs for each of: standard, reduced, zero-rated, exempt and those that are outside the scope of VAT.
- The total output tax due for the period.
- The total input tax for the period.
- Any additional circumstances where a scheme has been used or where there are cross-border transactions.
- Where there is a correction or adjustment, you need to give the details of the adjusted or corrected amount.
What software should you use
The storage of information and the corresponding VAT returns will need to be prepared and processed through third party software that must be compatible with HMRC systems.
HMRC are not themselves providing software to assist. Therefore, if you don’t already use accounting software, it is recommended that you purchase appropriate third-party software that is MTD compliant.
If you already use accounting software speak to your supplier to ensure that it will be MTD compliant come 1 April 2019.
What happens if you didn’t comply.
There are very few exemptions to MTD! HMRC will apply the same penalties as they currently impose for failure to keep or preserve records for VAT purposes. They can be as high as 100% of tax under-stated if HMRC deems the mistake to be careless or deliberate.
Hinton Abbott Accountants are here to advise you how to take the next step with MTD. Contact one of our Advisers on 01793 686 454.
Published December 2018 – Chris Pittock – Senior Partner