VAT – Making Tax Digital

HMRC has confirmed that from 1st April 2019 it will be mandatory that all VAT-registered businesses with a taxable turnover above the VAT threshold must use the Making Tax Digital service to keep financial records digitally, and to use software to submit their VAT returns. After this date HMRC’s intention is to no longer process paper VAT returns, or allow business to login to their website and input their VAT returns manually.  Instead all VAT registered businesses are expected to submit their VAT returns through cloud-based versions of accounting software such as Sage, Quickbooks, Xero, etc. HMRC has produced a list of the software suppliers with whom they have liaised, and who have (or are about to) test their software in HMRCs test environment.

The Pilot schemes were announced as being available for the simplest types of businesses (i.e. sole traders and companies as long as they are up to date with their VAT and do not sell to the EU) from the 16th October. Pilot schemes for the more complicated VAT registered business will be available from the Spring of 2019. Making Tax Digital then becomes mandatory for all customers from 1st April 2019, however a small minority of VAT-registered businesses (around 3.5% of mandated customers) with more complex requirements will have a deferred start date of 6 months to ensure sufficient time for testing the service with them in the pilot before they are mandated to join. It is not clear, but we assume they will be notified by HMRC of this deferment, and these businesses will be mandated to keep digital VAT records and send returns using MTD-compatible software from the 1st October 2019. Therefore farmers should begin talking to their accountants now, if they have not already, to prepare for this new regime in April next year.