Here is a summary of the key points to remember for Making Tax Digital ( MTD ) for VAT purposes:
- MTD takes effect for VAT return periods beginning on or after 1st April 2019.
- A business that is voluntarily registered does not need to join MTD this year.
- Once a business has joined MTD it cannot subsequently leave, even if the turnover falls below the £85,000 threshold.
- A business can adopt either a full accounts software package, or use spread sheets with bridging software.
- Each invoice must be digitally recorded ( but this does not mean that invoices have to be raised electronically…….they could be handwritten ).
- Purchase invoices should be recorded showing the total value plus the input tax claimed.
- There is no need to digitally record transactions that are excluded from VAT returns such as wages and drawings.
- Sales invoices should record the net figures, and the rate of VAT.
- For both sales and purchases, the processing date will be the invoice date unless the business uses the cash accounting scheme, when the payment date is adopted.
- Each individual invoice must be recorded in digital format. It is not acceptable to batch invoices together and make one entry based on a payment or statement total.
- A transaction does not have to be recorded digitally if this would be ” impossible, impractical, or unduly onerous “. HMRC have confirmed that this would apply to employee expenses for example.
- Businesses involved with MTD must submit their returns through HMRC’s Application Programme Interface ( API ).