Making Tax Digital – Are You Ready?
With effect from 1 April 2019, Making Tax Digital (MTD) will be mandatory, for VAT purposes, for all businesses with turnover above the VAT threshold – currently £85,000 of taxable turnover per annum. This means it will no longer be possible to keep manual VAT records, or VAT accounting information – these will all need to be kept digitally and VAT returns filed directly via software.
Although most VAT-registered organisations do keep digital records of some sort, it is still quite common for manual adjustments to be carried out, and for VAT return figures to be entered manually. Manual intervention may currently be necessary because particular VAT rules that apply to an organisation cannot be fully accommodated by the accounting package being used. For example, partial exemption calculations and special schemes such as the Tour Operators Margin scheme (TOMS) can cause complications.
In order to be ready for the April 2019 deadline, businesses will need to have software accounting packages that provide full functionality for VAT purposes. They will need to be able to collate all the required VAT information and deal with all the necessary adjustments to allow the return to be filed directly from the software.
The onus is currently on the software providers to develop the solutions that businesses are going to need. Before too long, however, businesses will need to look carefully at what they do currently do, and how things will need to change by April 2019. They will also need to bear in mind the fact that, while VAT is the first tax to fall within the MTD regime, other taxes will follow in due course and software packages will need to accommodate new developments.
There are still a lot of unanswered questions as far as MTD is concerned, and it will not have escaped your attention that the introduction of MTD is timed almost perfectly to coincide with Brexit, which could have its own VAT implications.
At Kingston Smith, we provide the support our clients need as they contemplate the challenges of the next few years. Get in touch with us if you would like to discuss VAT in more detail, or have questions regarding Making Tax Digital and what it means for you.