Making Tax Digital (MTD)

MTD, get ready for the changes…Part One

By now you should be aware that HMRC are rolling out a new initiative to make submitting taxes more efficient and easy for taxpayers, if not, you must have been hiding under a rock this whole time!

Making Tax Digital (MTD) for VAT will begin this April 2019 and will ensure that VAT-registered businesses above the VAT threshold of £85000 will have to keep digital records of their accounts (meaning each and every transaction will need to be recorded electronically) and submit their VAT returns using compatible software, you can find a list here: https://www.gov.uk/guidance/software-for-sending-income-tax-updates

This will mean that if your business is VAT-registered but making below the VAT threshold then these changes will not apply to you, however, you can still opt-in if you wish.

To work out your taxable turnover you should include standard rated, reduced rate and zero rated supplies and exclude exempt supplies and those outside the scope of VAT.
See this useful guide from HMRC here: https://www.gov.uk/vat-registration/calculate-turnover or better still, leave this to your bookkeeper who will calculate these figures accurately.
When considering the relevant period, it is the same rolling 12 months that applies when checking whether you have exceeded the VAT threshold and must compulsorily register for VAT.

Once a business is required to comply with MTD for VAT, the requirements continue even if the turnover of the business subsequently drops below the VAT threshold.

Part two to follow…