From 1 April 2019, all VAT-registered businesses with a taxable turnover above the VAT registered threshold, will be required to keep digital VAT business records and send their VAT returns using Making Tax Digital compatible, commercial accounting software.
Businesses with a taxable turnover below the VAT threshold can also sign up for MTD for VAT voluntarily.
When MTD is enforced, it will be a requirement for all registered businesses to keep digital records. Whether you’re currently using accounting software, excel, or paper-based accounts, you’ll need to ensure that you’re fully set up before using MTD compatible software before the deadline date.
What is MTD compatible software?
MTD compatible software supports the new MTD obligations, enabling you to keep digital records and exchange data digitally with HMRC through the Making Tax Digital Service.
It is also possible to use a set of software products that work together to support these obligations, however, the data must be exchanged between these applications digitally. So, whereas it is currently, acceptable to cut and paste data from one application to another, from 31 March 2020, there must be digital links between all MTD software products.
MTD compatible software is already available, while other suppliers have products currently in development.
Is my software suitable?
When you’re signed up to MTD, you’ll need to ensure that your Making Tax Digital software allows you to submit VAT returns and send Income Tax updates digitally.
You’ll also need the software to keep records of income and expenses for Income Tax or sales and purchases for VAT.
If you’re already using software, check with your software provider when it will be made compatible with MTD for VAT.
Bridging software is a digital tool that connects software to HMRC systems, allowing you to digitally report VAT information to HMRC and enabling HMRC to send information to you digitally.