HMRC has published draft Making Tax Digital for VAT (MTD for VAT) regulations, outlining how businesses must use MTD-compatible software to keep digital records and file their VAT returns.
Under the government’s MTD plans, from 1 April 2019 businesses with a turnover above the VAT threshold (currently £85,000) will be required to keep digital records for VAT purposes, and provide their VAT return information to HMRC using MTD-compatible software. The MTD requirement will remain even if a business’s turnover subsequently falls below the VAT threshold.
Keeping digital records and making quarterly updates will not be made compulsory for taxes other than VAT before April 2020.
Within the draft regulations, HMRC stated that businesses will be able to use multiple pieces of software, provided that there is a ‘digital link’ between them. This will enable records to be ‘kept in a range of compatible digital formats’.
The government also outlined that any digital software used must be able to record and preserve records in an electronic format; supply HMRC with information and returns from these records; and receive information from HMRC.
In addition, taxpayers will be permitted to calculate any adjustments outside of their digital records, and then transfer these into the software, the draft regulations revealed.
The government is seeking feedback on its draft MTD for VAT regulations. The consultation will close on 9 February 2018: the draft regulations can be viewed here.