From April 2019, VAT registered businesses with an annual turnover in excess of £85,000 will be required to keep their records in a digital format and submit VAT returns using Making Tax Digital (MTD) compatible software.
HM Revenue & Customs has been charged by the government to modernise the current tax system. Over the past ten years, HMRC have made various changes to our tax reporting including Corporation Tax and PAYE and the latest of these is MTD VAT.
Currently HMRC trusts agents, business and individuals to submit truthful VAT figures. Now HMRC has changed the way in which we submit information. So they can automate their compliance checks through the use of technology and therefore be able to spend more time on identifying potential fraud cases, performing investigations and pursuing active tax avoidance.
HMRC wants to have a digital audit trail. This means: digital records that can be traced to verify each transaction in the VAT return so that there is no opportunity for an individual to change these figures, whether deliberately or not, before finalising and sending the information to HMRC.
The software used for Making Tax Digital will then summarise and submit either to HMRC directly or via bridging software. If you currently use MS Excel for your records, this will necessitate using new software which will need to be finalised well in advance of the April-2019 deadline. As such, preparation of each VAT return will now require a further stage to submission.
If you have any questions on this or another accountancy topic then contact AJR & Co Ltd to arrange a free 30 minute consultation