MTD for VAT starts for the first VAT return that any business does for the first period starting on or after 1st April 2018.
MTD for VAT - Now the Dust has settled
The start of mandatory reporting involving MTD for VAT came in on 1st April. Benjamin Dyer, CEO of Powered Now, looks ...
The start of mandatory reporting involving MTD for VAT came in on 1st April. Benjamin Dyer, CEO of Powered Now, looks at the current state of things in the MTD world.
What is MTD?
MTD (Making Tax Digital) is the digital program designed to drag HMRC and us into the 21st Century.
Under this program, every aspect of tax is scheduled to become digital and detailed records of all income and expenses are meant to be kept on computer. But things haven’t been going smoothly.
While we should now be in the midst of a massive MTD program, so far the only tax to be covered is VAT. Don’t be fooled though, even if you don’t charge VAT you will be caught by MTD eventually. All sole trader businesses with sales of more than £50k will become subject to MTD for ITSA and have to report their returns by computer. But this will be by 2026 at the earliest.
What is MTD actually about?
The primary aim of MTD is to close the “tax gap” i.e. collect taxes that the government thinks they are missing. It doesn’t take a genius to realise that once everything is held digitally this will enable HMRC to check for fraud using methods like artificial intelligence.
How is the introduction of MTD for VAT going?
The implementation of MTD for VAT means that all VAT returns have to be made through the MTD system. Generally speaking the implementation was smooth and HMRC research reports some significant benefits. However, VAT-registered businesses are often already computerised and later phase of MTD are likely to be much more challenging.
What are the choices?
There is a vast array of over 300 software solutions available for MTD for VAT, including one from my company, Powered Now.
There is one big choice to make, to either use “bridging software” or implement a permanent solution. Bridging software simply copies data into the MTD portal with minimal changes. Our advice is to implement a permanent solution now. That means that you won’t need to change things again when the exemption allowing bridging software is withdrawn. You will also avoid an even bigger shock when other phases of MTD come in and which won’t allow bridging.
What to do
If you are VAT registered then you must use some form of computerised solution for MTD for VAT.