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   VAT
               AND
       MAKING
                TAX
    DIGITAL


From 1st April 2019 the way in which many businesses file VAT, and in some cases record their accounts, changed.

Adminsoft Accounts supports MTD compliant VAT returns and transaction records.

For those VAT registered businesses that trade below the VAT threshold, currently £85,000 p/a, many will still be using the old method (XML) of making VAT submissions. However, all will be required to use MTD VAT compliant software by 8th April 2021. Adminsoft Accounts supports MTD compliant VAT returns, as well as the old method of submitting VAT returns directly to HMRC. However, by 8th April 2021 the old method will no longer be supported by HMRC. Though their web portal that allows you to login in and enter the VAT figures manually will continue until April 2022.

So if you're VAT registered but currently not using MTD compliant accounts software, change is on the way. The rest of this document is about those changes. For most businesses, from April 2022 you will no longer be able to use HMRC's on-line portal to file your VAT returns. You will have to use 3rd party software, such as Adminsoft Accounts. That software will need to support MTD, because the old (current for many) way of submitting a VAT return directly to HMRC is not MTD compliant. So your software needs to be up to date.


What is the difference between the way I file VAT directly with HMRC now and what I'll be doing from 8th April 2021?

If you are using software to submit your VAT return rather than HMRC's on-line portal, the old way of directly submitting a VAT return to HMRC requires the data to be in XML format ('XML' is a way of presenting the data being sent). The new way, MTD requires data to be in JSON format, it also has a different way of handling security. If you use Adminsoft Accounts to file your VAT return directly with HMRC, you won't see much difference. Though one thing you will notice, is that to use MTD the software will take you to HMRC's web site to login in and authorise Adminsoft Accounts to send and receive your VAT data. This extra security will only appear once every 18 months or so, you won't have the hassle of going through the authorisation process every time. Also, Adminsoft Accounts will be able to download some of your VAT information that's held on HMRC's server.


What if I'm below the VAT threshold now, but then exceed it before April 2021?

If your turnover exceeds the VAT threshold in any 12 month period (not just your financial year), you will have to start filing MTD compliant VAT returns. Once you start with MTD, if your turnover falls below the VAT threshold, you can not go back to the old way of filing VAT returns. Once you start filing MTD compliant VAT returns, there's no going back. If you think your turnover may exceed £85k, you need to consider moving to MTD compliant software now.


Can I continue to use HMRC's on-line portal?

If your turnover is below £85,000 p/a then yes, until April 2022. But it's more convenient to use software like Adminsoft Accounts to make the filing for you. Plus at some point, you're going to have to change the way you file VAT, so may as well do it soon and give ourself plenty of time.


So I have to use some software to file my VAT return?

Yes you do. This can be desktop software, such as Adminsoft Accounts, or cloud based software. HMRC did say there will be free software available. Though not from them, they're expecting software developers to provide it. Some developers may provide software free of charge, but usually it'll be limited in some way. Often it'll only be free for the first few months, something like that. At this time I believe Adminsoft Accounts is the only one that can be truly used for free, with no limitations or time out.

There is another option, and that's to appoint an agent to submit your VAT return for you. Many accountants offer this service, for a fee. To get your VAT figures to the agent though, they'll often need to be in a spreadsheet (calculated, not manually entered), or output in a file in XML or CSV format or similar. You can not simply email your agent with the figures. The whole ethos of MTD is that any total figures are automatically calculated from the original sales/purchase transactions. They should not require any manual adjustments, or manually copying from one location to another. The idea is to reduce errors, and also to be able to show at any time exactly how a total figure was arrived at.

In Adminsoft Accounts when submitting VAT returns the old way, you can actually edit the figures in each box in the VAT 100 before submitting it. But when in MTD mode, this edit facility is not available. Although it can output figures to a spreadsheet and read them back, in cases where some adjustment is required. But your spreadsheet should make any necessary calculations automatically. It should not be used as a method for simply editing the VAT figures.


Does MTD require more or different information?

No. Filing a VAT return under MTD requires the same information as now. The only difference is that under MTD there is no box 10 used for cash accounting.


Do I need to change the way I run my accounts?

That depends on how run your accounts now. There are two things to consider: 1) you will be required to digitally record every transaction (but see below), and 2)your final VAT figures need to be calculated, they can not be manually entered into some software for submission. If you run your accounts on a spreadsheet, some software developers have produced bridging software that will allow you to submit MTD compliant VAT return directly from your spreadsheet. Adminsoft Accounts will allow you to do this. So in theory, you could continue to use a spreadsheet (provided every transaction is recorded), and just use Adminsoft Accounts to submit your VAT return. Though HMRC are encouraging businesses to move away from using spreadsheets as a tool for maintaining your accounts.


I have to use a spreadsheet to calculate my final VAT figures, what do I do?

In Adminsoft Accounts, it will produce your VAT figures for the period, you will then be able to click a button and output these figures to a spreadsheet. You can run your calculations, and then import the new VAT figures directly out of your spreadsheet back into Adminsoft Accounts for submission to HMRC. This operation is still MTD compliant. Provided the VAT figures have actually been calculated, and not simply manually tweaked.


I run a shop/cafe, do I have to record every single transaction?

No. The exception to the 'record every transaction' rule are retail environments. It will be acceptable to keep a record of daily gross takings. Which most retail businesses probably already do anyway. Further details can be found on HMRC's web site. If you use AutoManager or Shop/Cafe Manager in Adminsoft Accounts, these record each transaction anyway.


There is an extensive document on HMRC's web site all about MTD. You can find it here It's pretty big!

If you have any questions at all regarding Adminsoft Accounts and how MTD will be implemented, please email support@adminsoftware.biz

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2021-04-20 Tuesday: You may have noticed a new book has appeared called 'Using Adminsoft Accounts'. Check out the 'guides' section of this web site, or click here. I foolishly thought putting this book together would be quick and simple..... more
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