Guide toMaking Tax Digital

Making Tax Digital (MTD) is part of the government’s plan to make it easier for businesses to stay on top of their day-to-day accounts. HMRC wants to be one of the most digitally advanced tax administrations in the world – improving efficiency, effectiveness and ease of compliance. The plans signal the end of paper accounting for millions across Britain.

Timeline

  • April 2018 Pilot Scheme – small scale pilot testing of new VAT process.
  • April 2019 VAT Registered business must file via MTD.
  • April 2020 Corporation Tax and Income tax to be filed via MTD. Sole Traders and partnerships with income between 10k and 83k will also need to file via MTD.

Implementation – VAT

MTD will apply to all VAT registered entities that are over the VAT threshold (£85,000) from April 2019. Any business and unincorporated entities over the VAT threshold to set up a digital tax account and file quarterly returns online.

Voluntary registered but under threshold are not required to follow MTD. However, they can elect to follow MTD. Threshold does not include outside of scope or exempt. Charities are not required.

You cannot leave unless you deregister for VAT. If you qualify for MTD for VAT you have to stay in unless you deregister. Even if your turnover drops below the threshold.

If a business deregistered from VAT it will not be required to store information in MTD compliant form.

The first return that will have to be MTD compliant will be the First VAT period on or after 1st April 2019.

First MTD return

Depending on your VAT Stagger (this is when your VAT returns are due) your first MTD return will vary.

  • Those filing in Mar, Jun, Sept and Dec
    • Your first MTD Return will be quarter ending June 2019
    • This covers period 01 Apr 19 to 30 June 19
  • Those filing in Apr, July, Oct and Jan
    • Your first MTD Return will be quarter ending July 2019
    • This covers period 01 May 19 to 31 July 19
  • Those filing VAT returns in May, Aug, Nov and Feb
    • Your first MTD Return will be quarter ending August 2019
    • Thisc covers period 01 June 19 to 31 Aug 19

What you need to do

  • If you send your VAT information via excel then you do not need to do anything extra as we will modify the spreadsheet on our end to make it MTD compatible and then use the new software to submit.
  • If you are using some type of software such as Quickbooks or Kashflow and you wish to use the software to file the MTD VAT return. Please contact the office on 0121 783 5392 and we will discuss how we can help.
  • We will be contacting clients approximately 1 month before the VAT is due to authorise them for MTD. Further information will be made available then.

Charges

There will be an additional charge of £100 + VAT per annum for each company. This is due to the additional work required as well as the new software to make returns MTD compatible.

FAQs

  1. What additional information do I need to provide?
    • None. You should continue to provide the same information that you have previously. We will process the information and make it MTD compatible on our end.
  2. Do I need to give you all my accounts data for the year?
    • No. The current stage of MTD only affects VAT returns. Each return will need to be done on a quarterly basis as before.
  3. Do I need to upload all my invoices?
    • No. You will continue to provide the same information as you have done previously.
  4. Do I have to be MTD Compliant?
    • Short answer, yes.
    • Long Answer, any business over £85,000 turnover will need to be MTD compliant. In most cases the clients will be registered for VAT because they breached the £85,000 limit so therefore, they would automatically be required to be MTD Compliant.
  5. What happens if my turnover drops below £85,000 while I am submitting MTD Returns?
    • You will still need to submit MTD Compliant returns.
    • You can only leave MTD if you deregister for VAT. Even if your turnover falls below the £85,000 limit.
  6. I am on the Flat Rate Scheme. Do I need to be MTD compliant?
    • Yes. MTD is required for all VAT schemes.
  7. Does VAT MTD change the rules regarding VAT registrations?
    • No. The existing rules remain the only change is how the returns are submitted to HMRC.
  8. Will the fee I pay to Sigma go up?
    • Unfortunately, yes. We have had to invest in new software to shift the burden of making VAT returns MTD Compatible from the client to ourselves. Vast majority of clients will not need to make any change to the information they provide and when. This simplifies the process from the client side however on our end there is more work involved. The fee will be £100 + VAT per annum for each company.
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