Making Tax Digital (MTD) for VAT becomes compulsory for all VAT registered businesses with taxable turnover above the VAT threshold from April 2019. Many businesses are still in the process of working out what they need to do to be ready and new technology solutions will often be the easiest route for them. In particular, where businesses currently use spreadsheets to prepare VAT returns, a bridging tool to provide a digital link from the spreadsheet to the HMRC portal for the final submission stage may be the simplest solution for the initial MTD requirements that come in from April 2019. Both KPMG Tax Bridge and our tool for partially exempt businesses, PX Cube, are confirmed by HMRC to have made successful submissions in their live system.

From April 2019 all VAT registered businesses with taxable turnover in excess of the VAT registration threshold will have to maintain digital records for VAT and submit their VAT returns digitally. Readers may be aware of the one year ‘soft landing’ promised by HMRC to ease in the introduction of MTD but this only applies to the new requirement to have ‘digital links’ between different parts of the digital accounting records. There is no soft landing for the requirement to submit VAT returns digitally, so all businesses within MTD will need to have software in place that can connect to HMRC’s systems in time for the first VAT return period commencing on or after 1 April 2019. Many businesses currently maintain digital records (either an accounting package or spreadsheets) and use a spreadsheet to perform the final calculations for their VAT returns. For these businesses a very simple solution for the first year could be a ‘bolt-on’ bridging tool to provide the required final digital link from this spreadsheet to HMRC’s systems to submit the VAT return. KPMG Tax Bridge provides that solution and is confirmed by HMRC to have made successful submissions in their live system. 

Once the one year soft landing is over, businesses will need to comply with all the MTD requirements, including ensuring a seamless digital link from the recording of transactional data in the digital records through to the submission of the VAT return. Some businesses will currently have manual processes in place to copy data from one part of the accounting records to another and this will require changes to be made by April 2020. If you would like advice on this, including potentially undertaking a diagnostic review to identify where changes are needed, please speak to your usual contact.

For partially exempt businesses the process of calculating the entries for the VAT return is often far more complex. MTD is not introducing any changes to the VAT calculation rules but there will need to be a digital link from these calculations to submit the VAT return. KPMG’s PX Cube, which helps businesses manage partial exemption calculations, is confirmed by HMRC to have made successful submissions in their live system. 

For further information please contact:

Chris Downing