HM Revenue and Customs is to change the way businesses submit VAT returns to meet the Making Tax Digital for VAT legislation, which comes into effect from 1st April 2019.
Businesses with a turnover above the VAT threshold, which is currently £85,000, will be required to keep their records digitally, and provide their VAT return information to HMRC through Making Tax Digital functional compatible software.
However, just 40 per cent of business required to transition to Making Tax Digital are aware of it, according to a report from the House of Lords economic affairs committee.
VAT registration threshold
A spokesperson for the Independent Garage Association (IGA) said: “If you are registered for VAT and your taxable turnover is above the threshold, MTD will apply to you.
“If your taxable turnover drops below the VAT registration threshold at any point after 1 April 2019 you are still required to continue to keep digital records and send HMRC your VAT returns using MTD-compatible software.
“This obligation doesn’t apply if you de-register from VAT or if you are exempt from MTD for VAT.
“If your business has a taxable turnover below the VAT threshold you can also sign up to MTD voluntarily.”
IGA members will soon receive a “garage guide” to Making Tax Digital for VAT.
The guide includes an introduction to the scheme and how it works, guidance on how to transition before the deadline, a helpful checklist for your business as well as further resources.
According to the IGA, compatible software is a software product or set of software products that between them support the MTD obligations of keeping digital records and exchanging data digitally with HMRC through the MTD service.
If more than one application is being used, data that flows between those applications must also be exchanged digitally, called ‘bridging software’.
The IGA spokesperson added: “Digital records can be kept in a range of compatible digital formats.
“They do not all have to be held in the same place or on one piece of software.
“For example, a spreadsheet can be a component of digital record keeping provided the product that consolidates records, or summary records from the spreadsheet, can exchange data digitally with HMRC.”
Businesses will have until 31 March 2020 to ensure there are digital links between software products.
Ahead of this deadline, the IGA has said cut and paste will be an acceptable way to transfer information.
For further information about Making Tax Digital, IGA members can call 0845 305 4230.
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