Here are some frequently asked questions about Making Tax Digital. If you have any further questions, please don't hesitate to contact us.
Q. What businesses will be affected by MTD for VAT and how do they know if they need to comply?
- Initially, businesses that need to be compulsorily registered for VAT will be affected
- If you fall below the threshold or are voluntarily registered, your business will need to keep 12-month running total of taxable turnover
Q. What happens if I don’t comply?
HMRC have put in place a soft-landing period, to allow businesses time to update their systems and get to grips with any new systems, but after that there will be no excuses! If a business doesn’t comply with the MTD regulations, there will be penalties. And where late returns are filed because API software is not used, penalties for late filing payment may apply.
Q. Can I still use spreadsheets?
You can, but you’ll need some bridging software to connect to HMRC’s systems via an Application Programming Interface (API). HMRC aren’t issuing a standard format or API, so you would need the help of a third party to develop this.
Q. Will there be any exemptions or exclusions?
- Yes, members of religious societies that don’t allow the use of computers
- Age, disability, geography
- Businesses in insolvency proceedings
Please note: Existing exemptions from VAT online filing are likely to be carried over
Q. What about partial exemptions, VAT schemes and non-standard returns?
- Partial exemption calculations and other adjustments can be done outside the digital records for total of each type of adjustment
- Cash accounting, annual and monthly accounting, flat rate and margin schemes will continue as usual
- Businesses with unusual accounting periods for VAT (eg.13 4-week periods), will need to discuss this with HMRC
Q. I already use software - do I need to do anything?
Although it’s helpful that you are already doing some digital record-keeping, you may still need to change way you record transactions and file your returns Please contact Dains for more details.
Q. Will there be free software?
No. You can see the commercial software providers that HMRC recommends here - https://www.gov.uk/guidance/software-for-sending-income-tax-updates
Q. What if we use more than one system to keep my financial records?
You will need to link all systems you use digitally. The soft-landing period is there specifically to allow your business enough time to update old systems and get the help needed to make the switch to your new systems.
Q. If we go digital, do we still need to keep paper records?
There’s no need to keep paper records as well. HMRC will accept digital record-keeping like scanned or photographed invoices but the image must be clear and legible. All of the information must be recorded in the digital copy, even the T & C’s that may appear on the back of the invoice.
Q. Will HMRC be able to see all transactions on my VAT returns?
No, the submission will only be the 9 summary boxes on the VAT return. Your detailed transaction data won’t be seen by HMRC.
Q. I think my current systems already comply with MTD, do I need to do anything?
Email or call to check your existing set up and to discuss how we can make sure your systems compliant with MTD.
Q. My business is not VAT registered but I’m interested in going digital, is there a way to ‘opt in’ to MTD?
Yes, you can voluntarily opt into MTD. Please contact us for more details.
Q. My business is VAT registered but has turnover below the VAT threshold, what do I need to do?
Nothing yet, but at some stage the whole HMRC system will be digital and your business will eventually need to make the move over to digital software, so it’s a good idea to get a head start as changing over isn’t an immediate process.
Q. What if our businesses turnover falls below the VAT threshold after we have registered for MTD?
If your business needs to be compliant for MTD and later falls below the VAT threshold, you will still need to stay registered. Your MTD obligation would only stop if you deregistered for VAT.
Q. If my business is already exempt from submitting electronic VAT returns, does this change under MTD rules?
No, if you are already exempt from submitting electronic of VAT returns, then you still be exempt under MTD.
Q. What benefits are there to going digital?
There are lots of benefits to going digital. For starters, it’s an all-around more efficient system which allows for real-time information to be gathered and for improvements in security to be made. It will also mean that by keeping compliant you will avoid any penalties.
Q. How do I become compliant?
Contact the Dains team of MTD experts today to find out exactly what you need to do to become fully compliant.
Need further assistance?
Please contact us to discuss which is the best accounting package for you and your business by calling 0845 555 8844 or simply complete our enquiry form and we will get in touch.