Common FAQ’s about Making Tax Digital

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Making Tax Digital – What does it mean for your business?

If you are VAT registered then you will need to start to keep a digital record  (i.e. use software to record all your VAT invoices and receipts). If you are not VAT registered then digital record keeping is optional.

If you are VAT registered and do not currently use software to record your VAT (invoices to customers and from suppliers) you need to start making plans for Making Tax Digital.

This will come into effect on the 1st April 2019.

My business uses spreadsheets for records – will we have to change this?

You can continue to use spreadsheets to digitally record and store your business records.

You will however need to make sure the spreadsheets can be digitally submitted to HMRC.

One way to do this is using an API-enabled spreadsheet (meaning you can submit your records to HMRC using an API link). You could also start using Making Tax Digital enabled software.

My business is not VAT registered and I am unsure that I will earn £85,000 this year. What should we do?

You will only need to follow the rules of Making Tax Digital if your turnover exceeds the VAT threshold of £85,000.
To keep your finances up to date, it’s worth looking at your taxable turnover each month to see if you do exceed this figure at any point.

Software can also help make sure that you comply with VAT registration requirements.

At the end of the month, if the value of your taxable supplies in the previous 12 months or less goes over the registration threshold, then you will need to be VAT registered. This will mean you come within the range of Making Tax Digital.

This is also the same for any time where you expect the value of your taxable supplies will go over the registration threshold in the next 30-day period.

What if I temporarily go over the VAT threshold?

If your business isn’t VAT registered and you do go over the threshold, you will need to comply with Making Tax Digital.

If your taxable turnover then drops below the threshold, you still need to continue complying with the MTD legislation.

If you de-register from VAT then you don’t have to continue following the MTD rules.

If you meet one of the following exemptions, as outlined in the HMRC’s VAT notice you won’t need to follow the MTD rules:

  • Your business is run in it’s entirety by practicing members of a religious society whose beliefs are incompatible with the requirements of the regulations (e.g. those whose religious beliefs prevent them from using computers).
  • It is not practical for you to use digital processes to keep your business records or submit your returns due to reasons of age, disability, remoteness of location or for any other reason.
  • You are subject to an insolvency procedure.

My business is under the VAT threshold but I would like to be part of Making Tax Digital. Can I still do this?

The answer is Yes. Your business can choose to waiver exemption if you want to voluntarily follow the regulations of MTD.

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