What is MTDfB?
MTDfB is an upcoming piece of legislation from HMRC which will mean that many businesses, including sole traders, will have to send quarterly updates to HMRC, of their income and expenditure in a digital format.
HMRC’s MTDfB is currently being piloted on a voluntary basis and the regulation requirements for MTDfB for VAT have now been issued. Under the new rules, businesses with a turnover above the VAT threshold (currently £85,000) will be required to keep digital records for VAT purposes and to provide their VAT return information to HMRC using MTDfB functional compatible software.
When does it apply?
HMRC have said that the new rules will become mandatory from 1 April 2019, where a taxpayer has a ‘prescribed accounting period’ which begins on that date, and otherwise from the first day of a taxpayer’s first prescribed accounting period beginning after 1 April 2019.
Other than for VAT, keeping digital records and making quarterly updates will not be mandatory for other taxes before April 2020, although businesses below the VAT threshold which have voluntarily registered for VAT can opt to join the scheme.
There will be some exemptions from MTDfB for VAT, as there are with electronic VAT filing at present. However, the exemption categories are tightly drawn and unlikely to be applicable to most VAT registered businesses.
Will I need to change what I am currently doing?
It depends, the policy of ‘keeping digital records’ does not mean that businesses will be obliged to use digital invoices and receipts but it does mean that the actual recording of supplies made and received must be digital. It is likely that the use of third party software will become the norm for complying with this new obligation. HMRC have clearly stated that they will not be providing any such software.
HMRC have, however, advised that they will allow the use of spreadsheets for the collation of required information but that they will then have to be combined with add-on software that meet’s HMRC’s requirements to enable compliance with the obligations imposed by MTDfB.
What should I do now?
It is essential to ensure that you comply with all the VAT regulations that you are prepared for MTDfB and it is worth talking to a good accountant to understand more about how MTDfB will affect your business reporting and the timescale that applies to you. They will also be able to advise on how to use your accounting systems to bring together the VAT information accurately and quickly as well as ensuring that your business is VAT efficient. They can also provide assistance with the completion of VAT returns and negotiate with HMRC if disagreements arise.
Here at Keen Dicey Grover we have over 40 years of experience in understanding the complexities of VAT. We work hard to save our clients the headache and the time of dealing with their own VAT affairs, to resolve those complexities and to provide the confidence and comfort of knowing that their finances and VAT liabilities are efficient and in order.
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