In relation to other taxes such as income tax and corporation tax, businesses will not be required to keep digital 
records or report quarterly until 2020 at the earliest.
MTD will be available for businesses below the VAT registration threshold on a voluntary basis.
HMRC began the MTD pilot for VAT at the end of 2017 with small scale testing and a live pilot will begin in Spring 2018. Until the government are satisfied that the system works they will not trial it with the other taxes.
VAT registered businesses with a turnover in excess of £85,000 will be obliged to maintain digital records and submit quarterly VAT returns from April 2019.
Although 99% of VAT returns are filed online, only around 12% of VAT returns are filed via software. We can only assume that for the remaining 88% the VAT return figures are presumably entered manually into the government gateway page and submitted to HMRC. Under the MTD proposal it is expected that VAT returns are filed directly via software.
The biggest change is that businesses will no longer be able to keep manual records. The use of spreadsheets for VAT accounting is commonplace, not only to maintain underlying records but also to convert the output from the accounting software into figures for the VAT return. This is particularly relevant to partially exempt businesses. In future these spreadsheets will need to interact with the software to meet the requirements of MTD.
The timing for the introduction of MTD is not ideal as it coincides with the UK leaving the European Union and VAT and Customs duty are likely to be impacted by Brexit. Not only will businesses be expected to understand the technical changes to the tax rules, but they must ensure that their accounting systems and processes deal with the changes adequately and in line with the new MTD reporting requirements.
Though businesses don’t need to maintain digital VAT reports until next year now is the ideal time to get on top of any VAT issues facing your company. Our team of VAT experts can advise on a whole range of related issues from partial exemption to carrying out a VAT review or assisting with VAT registration. Get in touch today to discuss how we could work together.
