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Are you Ready for Making Tax Digital for VAT?

Making Tax Digital (MTD) for VAT came into force in April 2019, and marked the end of the first stage in the government’s quest to digitise the UK tax system. 

What is Making Tax Digital for VAT and who is affected?

From April 2019, any business with a turnover over the VAT threshold and registered for VAT had to keep digital records and submit their VAT returns using MTD compatible software.  

From April 2022, this was expanded to include all VAT registered businesses, including those who registered voluntarily, so if you were exempt because of voluntary registration you are now included in the scope of MTD for VAT.

What are the software requirements?

As a minimum, your MTD compatible software will need to:

  • Allow you to keep digital records

  • Allow you to digitally report VAT information to HMRC

  • Allow HMRC to send information to you

These functions don’t necessarily need to be achieved via the same software. For example, you could keep your records using a spreadsheet application and use bridging software to communicate with HMRC. Where your accounting and communication software are different, they’ll need to be connected via digital links.

Keeping digital records

This could mean using specialist accounting software, or you might use a simple spreadsheet application, depending on the needs of your business. Some businesses might keep their records in several different software packages, and this is fine as long as data is moved between them digitally, rather than by manual entry.

Submitting and receiving information

As well as keeping digital records, you’ll need to be able to exchange data through the MTD service. If you’re using specialist accounting software it could well have this capability built in. Otherwise, you’ll need to use bridging software to take the information from your records and submit it to HMRC in the required format.

Digital links

Under MTD, where you use more than one piece of software, the movement of data between them must be achieved digitally, rather than by manual data entry. This includes importing data from a spreadsheet, for example using a CSV upload, but not via cut and paste.

If you’re with Orange Genie Accountancy

If you’re lucky enough to be with Orange Genie Accountancy, there’s no cause for concern. We provide you with access to online accounting software which meets all MTD requirements and we’ll prompt you to keep the correct records and submit your return in the correct way. All you have to do is follow your accountant’s advice. If you have any questions or concerns, just contact your Orange Genie accountant who will be more than happy to help.

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