From 1st April 2019 the way in which many businesses file VAT, and in some cases record their accounts, will change.
Adminsoft Accounts will support MTD compliant VAT returns.
Those businesses under the VAT threshold, currently £85,000 per year will not be required to use MTD. If VAT registered, they can continue to file their VAT returns as now. Including using the HMRC on-line portal. This portal is not closing down. These businesses will see no change in their accounting procedures. Although Adminsoft Accounts will support MTD compliant VAT returns, the current (old) way of submitting VAT returns directly to HMRC will remain. However, change is on the way, though HMRC do not anticipate extending MTD to all businesses until April 2020 at the earliest.
For those businesses whose turnover is in excess of the VAT threshold, estimated at 1.1m businesses, things may change, and the rest of this document is about those changes. There are some exceptions, in that around 3.5% of businesses will not be required to use MTD even though their turnover exceeds the VAT threshold. You will need to check with HMRC if you think you have a good reason not to be included for MTD. For most businesses, from 1st April 2019 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 current 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 April 2019?
If you are using software rather than HMRC's on-line portal, the current 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). 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 for submitting your VAT returns. This extra security will only appear once every 18 months, 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?
If your turnover exceeds the VAT threshold in any 12 month period, 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.
Can I continue to use HMRC's on-line portal?
The short answer is NO. I'm afraid not. While the portal will continue to exist, you can not use it if your turnover is in excess of the VAT threshold.
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 be free for the first few months, something like that. At this time I believe Adminsoft Accounts is the only one that is truly 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. Most accountants will probably offer this service, for a fee. To get your VAT figures to the agent though, they'll 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.
Does MTD require more or different information?
No. Filing a VAT return under MTD requires exactly the same information as now. The same 9 boxes (or 10 if you use 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 email@example.com