In less than a month’s time, around 1.2 million businesses will be included in Making Tax Digital (MTD) for VAT – a Government scheme that makes digital record-keeping and filing mandatory.
If your partnership has a turnover above the VAT-registration threshold of £85,000, you’ll need to meet MTD requirements for VAT return periods from 1 April 2019.
You or your partner will already be responsible for keeping the right records and filing returns. The main difference under MTD is that doing so digitally will become a requirement.
This is more than just a regulatory change. For many businesses, it’s a chance to embrace the latest digital technology, saving administrative time and making it easier to manage their accounts.
According to Mel Stride, financial secretary to the Treasury, MTD will “give businesses more control over their finances, allowing them to spend time focusing on innovation, growth and the creation of jobs”.
By using MTD-ready software like Xero, your partnership can comply with the scheme as well as benefiting from the efficiency of online accounting software.
What you need to do
Keep digital records
If you’re a nominated partner, you’ll need to keep a digital record of the following details:
- Designatory data: This includes the name, address and VAT-registration number of your partnership, and details of any VAT accounting schemes used.
- Supplies made and supplies received: For each supply, you need to record details of the time it was made or received, the value of the supply, and the rate of VAT charged or reclaimed.
- The VAT account: This demonstrates the link between the digital VAT records and the VAT return submitted to HMRC, showing input and output of tax.
You should keep business records for VAT purposes for at least six years.
File returns using software
The other side to the MTD rules is filing your return using compatible software.
Using the information you’ve kept in your digital records, Xero will calculate your VAT return. You’ll need to confirm this is correct before sending it to HMRC.
What’s next?
There are plans to introduce quarterly updates under MTD for both income tax and corporation tax in the future, but no regulations are currently in place for either of these stages.
The Government has indicated they’ll be brought in from April 2020 at the earliest, although this is likely to change.
There are pilots open for both MTD for VAT and MTD for income tax, which are intended to ease businesses into the new requirements while also testing the process.
While partnerships have been able to join the MTD for VAT pilot scheme since 20 December 2018, they currently can’t join the pilot for income tax, which is open to sole traders and landlords.
We’ll keep you up to date on any developments that affect you.
Get in touch
If you have any questions about how MTD will apply to your partnership, we can talk you through them.
Contact us for advice on getting ready for the new rules, or find out how our real-time accounting and VAT services can help.
