Making Tax Digital for VAT (MTD for VAT) is set to come into effect from 1 April 2019 for businesses which have a taxable turnover above the VAT registration threshold (currently £85,000). Under MTD, businesses will be required to maintain digital records and submit VAT returns using their accounting software.
What does it mean?
In simple terms, for most VAT registered businesses already using an accounting system that is MTD compliant, the figures are submitted electronically instead of running the VAT Return, printing out the summary, then logging into the HMRC website and re-keying the figures in boxes 1,2,4,6,7,8 & 9.
What will be the benefit?
Apparently, this is going to prevent a lot of mistakes and I would agree. I've been submitting VAT Returns for over 28 years and, yes, you guessed it, only a few months ago I mistakenly keyed in the figure in box 4...I took the figure that was in box 5 on my print out and submitted the VAT Return without double checking. So, not only did I have the hassle of making a correction but the business was out of pocket. Eventually, HMRC refunded the overpayment but I do remember having to follow-up. For a simple mistake, it was a waste of time for both HMRC and me.
Why is eveyone talking about an API?
If your not an accounting software developer, don't worry. API stands for Application Programming Interface and this is what developers need in order to integrate, in this case, their accounting software with HMRC's software. In other words, it allows the two software applications to talk to each other so that us humans don't need to login and re-key data that already exists in one system into another.
Do we have to wait until April 2019?
If your accounting software allows you to, then no. I would start submitting VAT Returns as soon as you can. If your accounting software does not have this functionality then speak to your software supplier or perhaps move to Exact Online.
Need more info
VAT Notice 700/22: Making Tax Digital for VAT explains the rules in detail.