The Making Tax Digital rules apply from your first VAT period starting on or after 1 April 2019. A ‘VAT period’ is the inclusive dates covered by your VAT Return.
Making Tax Digital for VAT requires VAT registered businesses with taxable turnover (see below) above the VAT registration threshold to keep records in digital form and file their VAT Returns using software.
It is increasingly common for business records and accounts to be kept digitally, in a software program on a computer or tablet, or in a smartphone application, or maintained through such a device and stored using a cloud-based application. The difference under Making Tax Digital is that the software which businesses use must be capable of keeping and maintaining the records specified in the regulations, preparing their VAT Returns using the information maintained in those digital records and communicating with HMRC digitally via their Application Programming Interface (API) platform.
If your digital records are up to date, software will be able to collate and prepare your return for you. It will then show the return to you and ask you to declare that it is
correct and confirm that you want to submit it to HMRC. Once you have submitted your return you will receive confirmation through your software that it has been received.
Only businesses with taxable turnover that has never exceeded the VAT registration threshold (currently £85,000) will be exempt from Making Tax Digital. You will therefore need to keep an eye on your taxable turnover, especially if you think it is close to the VAT registration threshold.
If your turnover is over £85,000 and you are still using spreadsheets to manage your accounts then you need to move over to some accountancy software before next April. Contact us now and we can help