All VAT-registered businesses need to prepare for the upcoming changes demanded by the government’s Making Tax Digital scheme, which will apply from April 2019. Under the new rules, businesses will need to keep comprehensive digital records and file taxes online.
This blog is part of a series covering common questions around VAT and Making Tax Digital. Visit parts one and two, ‘MTD for VAT: FAQs’ and ‘Making Tax Digital for VAT’, for more information.
VAT and Making Tax Digital: Can I Keep Using Spreadsheets?
Unfortunately a spreadsheet by itself is not likely to be a sufficient form of record-keeping under MTD. It’s not hard to see why: it’s not only easy to make mistakes on spreadsheets (utilising incorrect formulae, for instance), but also an accidental click of a button could completely alter the contents of a particular cell.
A primary aim of Making Tax Digital is to improve the accuracy of reporting, and as such it’s highly recommended that businesses move away from spreadsheets and utilise compliant software for the majority of their accounting.
What Digital Records Do I Need to Keep?
Most businesses will need to keep a variety of records, including:
- Your business name and registered address.
- Your VAT registration number.
- Details of relevant VAT accounting schemes.
- For each invoice, you will probably need to record the net value, time and date of supply, and the relevant VAT rate.
- More information may need to be kept depending on the nature of your business.
When it comes to VAT and Making Tax Digital, it’s extremely important that organisations get to grips with their obligations well in advance of April 2019. An IBISS & Co qualified accountant would be happy to guide your business through the process.
VAT and Making Tax Digital: What Records Do I Need to Keep For Any Adjustments?
When adjustments are made in compliance with VAT rules, this adjustment must be recorded digitally via MTD-approved software. Whilst it’s not necessary to keep a digital link to any calculations that have been made to support the recorded total, it’s a good idea to provide one anyway – this could be very useful in future if the company was audited.
Do I Need to Worry About MTD if My Business Turnover is Under the VAT Threshold?
Whilst it might be good practice to comply with MTD for VAT if your business is VAT-registered, regardless of turnover (as your turnover may well increase in future), you are able to opt out if you wish. You will need to inform HMRC in writing that you wish to ‘deregister’.
MTD rules will become compulsory for businesses voluntarily registered for VAT as soon as the taxable turnover exceeds the threshold. Note that once you’ve started to comply with MTD you will be expected to continue with it – even if your turnover falls below the threshold – unless you formally deregister.
VAT and Making Tax Digital: Am I Exempt?
There are a few other conditions under which a business might be exempt from MTD (aside from turnover not exceeding the VAT threshold). In order to apply for an exemption, you will need to contact HMRC directly to discuss the situation. HMRC will look into alternative measures for your organisation, depending on the nature of your situation; it may be that they do not exempt the business, but instead offer assistance to help you comply with digital record-keeping procedures.
A business may be granted exemption in the following scenarios:
- Issues with digital record-keeping to do with age, disability, or remoteness of location.
- Issues with digital record-keeping to do with religious beliefs (for example, if senior members of the organisation are not able to use computers due to their beliefs).
- If – for any reason – it is not practicable for business owners to use digital tools to file returns or record business records.
- If the business has become insolvent.
Whilst you don’t always need an accountant to file your return for you, it’s always worth consulting a qualified tax adviser to ensure that you’re keeping adequate records and preserving the necessary information. The IBISS & Co team can guide you through the process of becoming MTD compliant, making sure you’re up to date with all the latest legislation and that your business is well prepared for the changes ahead. Contact us today for a no-obligation quote.