Making Tax Digital (MTD) is an HMRC initiative designed to make sure the UK tax system is effective, efficient and easier for taxpayers. It begins on the 1st April 2019 with VAT. From that date VAT registered businesses have to keep digital records and submit VAT returns using compatible software. With so much information available about Making Tax Digital it can be confusing. To help you prepare for the biggest shake-up in VAT and accounting in decades, the team at Yorkshire Accountancy have put together a list of common misconceptions and debunked them. Compliance doesn’t have to be complicated as long as your records are up to date, stored appropriately and transferred to HMRC via an approved method, you’re there!
1. Older bookkeeping software needs to be upgraded in favour of cloud accounting bookkeeping software.
No, any software can be used, it must, however, store individual transactions digitally. It must also have the capability to transfer the VAT return data in digital form to MTD enable bridging software
2. I must purchase a new software package in the place of using Bridging Software after the 12 month soft landing period.
No, bridging software can be used indefinitely, not just for the soft landing period.
3. Spreadsheets must not be used for digital record keeping.
No, you can use spreadsheets for digital record keeping. As was the case for bridging software, spreadsheets can be used beyond the soft landing period specified by HMRC.
4. A ‘digital link’ does not include a CSV file transfer.
A CSV file is recognised as a digital link between where the records are stored and the MTD submission software.
5. Copying and Pasting Data is sufficient to create a digital link.
Under the regulations, this is not considered to be a digital link and is therefore not compliant.
6. I can go back to the old VAT 100 submissions if I don’t like MTD for VAT.
No, MTD for VAT is here to stay and compliance for VAT registered businesses is mandatory.
7. Data cannot be adjusted once exported from the bookkeeping software.
Adjustments are necessary as part of the more complex VAT arrangements. HMRC recognise this and state that all adjustments must be documented within the spreadsheet.
8. I must submit all of the transactions that make up the VAT return.
HMRC only wants the nine boxes of numerical data that make up the VAT return.
9. I can just type in the nine boxes of data.
No, all VAT records must be kept digitally. These records will be used to populate the nine boxes of information required by HMRC automatically.
10. My accounting software must interact directly with HMRC for MTD.
Some accounting software can interact directly with HMRC however this isn’t necessary. Bridging software can be used in the place of a direct link.
Compliance with the new regulations doesn’t have to cause a headache. We want to help our clients with their compliance so if you have any questions or concerns, please do get in contact, we’ll be happy to assist.