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Making Tax Digital for VAT


What is it?


Making Tax Digital is a Government initiative to introduce a digital tax system. The first step into this brave new digital world is for VAT registered businesses and their VAT returns for VAT periods starting on or after 1 April 2019.


What's the latest?


HMRC have recently released VAT notice 700/22 to put some meat on the bones of what this means for businesses in the future.


Will it affect me?


Making Tax Digital for VAT will apply to all businesses who have turnover over the VAT registration threshold, this is currently £85,000 in the previous 12 months.

There is good news is for businesses that have registered voluntarily, this new reporting regime does not apply to them.


What do I need to do?


If you currently file your VAT returns with HMRC through your online tax account you will not be able to do this from 1 April 2019, you will need to use commercial software to digitally keep your business records.

If you use more than one type of software to keep your records, there must be digital links between the different software, manual “cut and paste” will not be allowed. Thankfully, there is soft launch in respect of digital links and businesses have until 1 April 2020 to ensure they have software that is digitally linked. VAT notice 700/22 has a number of examples of digital links should you want to check your current system.

Online traders using third party platforms such as Amazon, Etsy or Ebay will be pleased to note that it is acceptable to treat information received from this third party as one sales invoice. This could be an Amazon statement for instance. This will mean that as long as the sales on the statement are in the same VAT return period they can be digitally recorded as one sale.

One area of concern was that those businesses using cash accounting for their VAT returns would have to digitally record the time of supply as well as the date of the cash transaction. It is quite usual for those businesses using cash accounting to only record the date of the cash transaction. Thankfully, the recent VAT notice confirms that the time of supply is the date of the cash transaction.


How we can help


We are currently helping our clients prepare for Making Tax Digital for VAT, if you would like our help with the move to digital please get in touch, in particular:

Moving businesses books onto commercial softwareReviewing your digital linksBookkeeping supportOnline platform seller support

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