Making Tax Digital (MTD) – Frequently Asked Questions
What is Making Tax Digital for VAT?
Making Tax Digital (MTD) is the process implemented by the Government that requires businesses to utilise software to take care of the recording and maintenance of their financial history in accordance with Government regulations. This can be any platform that is fully MTD compliant, though this should be fully checked before implementing new systems or enacting changes to your platform.
When did Making Tax Digital start?
The MTD programme asks businesses to handle accounting periods that start on or after April 1st 2019. From this point, the program is in place and any solutions used in-house should be applied to your tax and record keeping.
Is MTD mandatory?
Yes. Making Tax Digital is mandatory if you fall into the compliance category. If your business falls outside of that category after April 1st 2019, you will still be required to keep full records using compliant software.
Who needs to register for MTD?
If you are registered for VAT and your turnover is above £85k, you will be required to keep digital records of your business transactions through MTD compliant software.
Who is exempt from making tax digital?
If your taxable income falls below the £85k threshold, then your business is not required to engage with the system at this stage. If you believe there is a specific reason why you believe that your business should be exempt from MTD, this can be taken up directly with HMRC by telephone or through writing.
How long does it take to sign up to MTD for VAT?
Once your business has registered with the MTD system, it can take up to 72 hours for the process to complete. If your business has not received confirmation within this period, it is important that you contact HMRC and confirm your status or take steps to identify the reason that you were unable to register.
When do I have to submit my first MTD VAT Return?
Signing up or re-registering to the MTD service needs to be carried out a minimum of five days after your last MTD VAT submission. This should also be a minimum of eight days before your first MTD VAT return submission.
Can I opt out from MTD?
Once your business crosses the £85k threshold for MTD compliance, you will be required to register for MTD. Once you fall within the selection criteria, you are not able to opt out of MTD registration unless you fall outside the criteria AND deregister for VAT. If you have chosen to voluntarily opt-in despite not meeting the acceptance criteria, you can freely choose to opt out by contacting HMRC.
What is a digital record?
Keeping your records digitally for Making Tax Digital (MTD) purposes means that you must store a digital copy of the transactions which make up the figures on your VAT return. There are three main elements to the digital records you need to keep under MTD. These include:
- Permanent Data: This includes your business name, address, VAT reg number, and details of any VAT accounting scheme used
- VAT Account: Full details of your current VAT information
- Transaction Data
How does MTD affect the Flat Rate VAT scheme?
If your company is on the Flat Rate VAT scheme, you do not need to keep a digital record of your purchases unless they are capital expenditure goods on which input tax can be claimed. And, you do not need to keep a digital record of the relevant goods used to determine if you need to apply the limited cost business rate.
What is MTD Compatible software?
MTD compatible software is any digital platform that allows you to store, extract, and provide digital records with the submission of your VAT returns. This also includes bridging software that is able to connect to non-compliant software and access the information that HMRC requires. Many digital platforms already enjoy this feature and, before making a purchase or upgrade, be sure to check its degree of compliance if you are affected by the policy. The HMRC maintains a regularly updated list of MTD compliant software.
What information or records do I need to store for MTD?
MTD does not require you to keep additional records, but to record them digitally. Your digital records should include, for each supply:
- The time of supply
- The value of supply
- The rate of VAT charged
This should also be supplemented with key information about your business, including-
- Your business names
- Your business addresses
- Your VAT reg number
- Details of any VAT accounting schemes
What information is supplied to HMRC under MTD for VAT?
HMRC is able to access the permanent, financial and VAT data provided as part of your submission. This is reviewed in full accordance with the 2018 Data Protection act and they will only review the information or allow other bodies to review it to-
- Check the accuracy of the information provided
- Detect or prevent crime
- Protect public funds