HMRC is phasing in its landmark Making Tax Digital (MTD) regime, which will ultimately require taxpayers to move to a fully digital tax system.
Regulations have now been issued which set out the requirements for MTD for VAT. Under the new rules, businesses with a turnover above the VAT threshold (currently £85,000) must keep digital records for VAT purposes and provide their VAT return information to HMRC using MTD functional compatible software.
The new rules have effect from 1 April 2019 where a taxpayer has a ‘prescribed accounting period’ which begins on that date, or otherwise from the first day of a taxpayer’s first prescribed accounting period beginning after 1 April 2019. HMRC has recently announced that the rules will have effect for some VAT-registered businesses with more complex requirements from 1 October 2019.
Included in the deferred start date category are VAT divisions, VAT groups and businesses using the annual accounting scheme. HMRC has recently opened a pilot service for businesses with straightforward affairs and the pilot scheme will be gradually extended for other businesses in the next few months. Keeping digital records and making quarterly updates will not be mandatory for taxes other than VAT before April 2020.