Making Tax Digital – Latest Guidance

30th October 2017

Despite previous delays and uncertainty, the September Finance Bill put the HMRC Making Tax Digital (MTD) project confidently back on the map, with firm proposals for legislation related to the digital reporting of VAT returns. 

making tax digital guidance

Recap of July 2017 Update

In a previous update on 13th July 2017, it was announced that MTD would now only be applicable for VAT returns, effective from April 2019. From this deadline then any business meeting the current VAT threshold of £85k would have to:

  • Maintain digital records for VAT return purposes
  • Submit any VAT returns using compatible software with that of HMRC

In addition, it was stated that businesses not meeting the VAT threshold could also participate on a voluntary basis for both Income Tax and VAT.

September 2017 Update

The latest Finance Bill, published on 8 September 2017, includes new legislation that allows HMRC to introduce specific regulations for ensuring that businesses meet the new MTD requirements with regards to VAT.

Specifically, the new legislation introduces a new Clause 62 into Schedule 11 of the VAT Act 1994 (administration, collection and enforcement).

For those businesses reaching the VAT threshold, the clause specifically gives HMRC new authority to make changes to regulations in order to request that a business keeps, preserves and submits digital records.

Key points of the legislation

Below are some key points of the new legislation. Further details can be found in HMRC’s September MTD update.

  • Businesses will need to preserve digital records in “functional compatible” software, for up to 6 years
  • Following deregistration, a business must preserve their records for up to 6 years
  • The information that a business will need to keep and preserve digitally will include:
  • Business name
  • Principle place of business
  • VAT registration number
  • Information regarding which VAT accounting scheme is used by the business
  • The VAT account
  • Information about supplies made and received

Timing

Although the MTD timetable has slowed, with the first wave now incorporating VAT returns only, this new legislation shows a continued commitment to MTD.

The intention is that HMRC will introduce all new VAT regulations related to MTD no later than April 2018, meaning that all businesses and those software developers involved a period of 1 year to prepare.

HMRC is continuing to work alongside commercial software suppliers such as Xero, FreeAgent and Sage to develop systems and products to enable digital record keeping. Pilots of MTD for business for income tax are also continuing with a small number of volunteers.

If you would like any further advice on Making Tax Digital or how your business could benefit from digital accounting software, please do not hesitate to contact one of our Accounting team.

Chartered Accountants in Sunderland, offering expertise on everything from Tax and Business Planning,
to Accounts and VAT.