07 March 2019
Even as the deadline for Making Tax Digital approaches, less than one month away, there is still an alarming number of myths and misconceptions regarding MTD which make the implementation process a minefield for most businesses.
I was fortunate enough to be on a webinar last week with HMRC’s Making Tax Digital Customer Readiness team, who actively dispelled some of the myths currently circulating business forums and other platforms, for instance:
- The HMRC VAT portal will close after April 2019;
- HMRC will deny access to the online portal where a business has a turnover above £85K – even if this includes exempt supplies and their taxable turnover is below £85K;
- MTD for VAT is being postponed;
- MTD requires a cloud-based software package and spreadsheets are not allowed;
- The “soft landing” period also covers digital records so I don’t need these until 2020;
“The HMRC VAT portal will close after April 2019”
HMRC have confirmed that the current portal used for VAT submissions will remain fully operational and will naturally need to do so as there will be a cohort of businesses which are VAT registered but below the £85k threshold.
“HMRC will deny access to the online portal where a business has a turnover above £85,000”
Businesses which have turnover above £85k but taxable turnover below £85k will not need to comply with MTD currently, therefore the online portal will remain the instrument for submitting VAT returns.
“MTD for VAT is being postponed”
Although there was a number of objections to the implementation of MTD, including a call for postponement from the House of Lords, MTD will not be delayed now and is going to be effective from 1 April 2019. It is more likely the soft transition period will be extended if there are issues in the new process of MTD.
“MTD requires a cloud-based software”
MTD does not require cloud-based software. In fact, a business can be MTD compliant by preparing their VAT return in a spreadsheet as long as this spreadsheet is then digitally submitted to HMRC via bridging software.
Non-MTD compliant software can also be used provided the VAT return can be digitally exported into a spreadsheet and then submitted using bridging software. Naturally, cloud-based software will offer a more seamless integration as well as a host of other great benefits to business intelligence and management reporting.
“The ‘soft landing’ period also covers digital records so I don’t need these until 2020”
The soft landing period to April 2020 is only for the digital link from non-MTD compliant software to the VAT return spreadsheet as mentioned above. Digital record keeping is covered within its own section of Notice 700/22 and therefore not covered by the soft landing period. Some software will meet the requirements however there are also some records that by law must be kept and preserved in their original form either for VAT purposes or other tax purposes. For example, you must still keep a C79 (import VAT certificate) in its original form.