1. Moore Stephens East Midlands Tim Woodgates BSc (Hons) CTA ACCA MAAT
Making tax digital
Moore Stephens East Midlands
Tim Woodgates
BSc (Hons) CTA ACCA MAAT

2. AGENDA - What is the point of Making Tax Digital?
-          What is Making Tax Digital?
-          Does Making Tax Digital Legislation affect my business?
-          What does my business need to do?
-          When does Making Tax Digital begin – is it delayed?
-          How can my business prepare?
-          Can I still use spreadsheets for my business records?

3. WHAT IS THE POINT OF MAKING TAX DIGITAL?
Reducing tax payer errors to improve the tax take
Controversial premise
HMRC ambition to “become one of the most digitally advanced tax administrations in the world”
Recognition of new technological age

4. WHAT IS MAKING TAX DIGITAL?
All about how businesses and individuals interact with HMRC
Focus on digital records and digital submissions of data to HMRC
Making Tax Digital (MTD) only to apply for VAT purposes currently
No other taxes to brought into MTD until 2020 at the very earliest

5. DOES MTD AFFECT MY BUSINESS?
YES, if you are:
VAT registered AND
Have taxable turnover above £85k (VAT registration threshold) – i.e. exclude exempt turnover
Doesn’t matter whether you are a sole-trader, landlord, company, LLP, trust, charity, etc.
Once you're in – you’re in
Only escape is to de-register from VAT
Not subject to MTD if your business is voluntarily registered for VAT

6. EXEMPTIONS
It’s not reasonably practicable because of age, disability, remoteness of location or for any other reason
Subject to an insolvency procedure
The business is run entirely by practising members of a religious society or order whose beliefs are incompatible with using electronic communications or keeping electronic records
MUST APPLY TO HMRC

7. WHAT DOES MY BUSINESS NEED TO DO?
Your business must record its transactions in a digital format within “functional compatible software” and submit its VAT return directly to HMRC from that software.
Manual record-keeping therefore will not be a compliant system
Any manual re-keying of information for the VAT return is not MTD compatible – the VAT return should be submitted seamlessly to HMRC.

8. WHAT INFORMATION NEEDS TO BE RECORDED DIGITALLY?
Designatory data
Name of business
Address for principle place of business
VAT registration number
Purchase invoice
Time of supply i.e. date
Total invoice value excluding VAT
Input VAT being claimed
Sales invoice
Time of supply i.e. date
Invoice value excluding VAT
VAT rate applying to the sale
VAT account
The creation of the VAT return essentially from the underlying records

9. WHAT INFORMATION NEEDS TO BE RECORDED DIGITALLY?
VAT adjustments can be journalled in i.e. fuel scale charge adjustments, partial exemption calculations, etc
No requirement to record digitally transactions that are outside of the VAT return i.e. wages paid
No need to create sales invoices digitally
Retailers – do not need to record every single transactions into their software. They must however record their daily gross takings in a digital format
The submission of the MTD VAT return is still only 9 totals

10. WHEN DOES MTD BEGIN? VAT periods commencing on or after 1 April 2019
First VAT return therefore 30 June 2019
Deferred start date for complex VAT affairs of 1 October 2019:
VAT groups
Annual Accounting Scheme businesses
Trusts
NFPs and local authorities
Plus others
Must have a letter from HMRC that states you are subject to the deferred start date.

11. HOW CAN MY BUSINESS PREPARE?
Review existing record keeping system
is it already compliant?
If already using software, are you on the latest version?
If not, you will need to look at either:
Purchasing some form of “functional compatible software”
Possibly outsourcing the VAT compliance to a third party

12. SOFTWARE Issues to consider: Cost - £6p/m - £20p/m or more?!!
Ease of use
Experience within business?
Recruitment?
Training?
Hardware cost?
Functions required?
Cloud based or standalone?
Benefits:
Ability to involve other apps such as automatic bank feeds and expense scanning for example – cut processing time
Real time management information
Accountant access – less compliance based and more strategic advice and planning
More future-proof than spreadsheets

13. OUTSOURCING Issues to consider: Cost Benefits:
Redeployment of bookkeeping staff
Timing of information to be provided
Benefits:
Remove the MTD burden
Accessible on demand
Expert advice
Reduced employment costs
Efficiency gains
Benefits to tax planning and management reporting

14. CAN I USE SPREADSHEETS? YES
BUT you do need some form of “bridging software” to make it MTD compliant however
Bridging software operates as link between the business’s spreadsheet record and HMRC’s system (see next slide)
Likely to be the cheapest way of achieving MTD compliance
Need to consider how long this will be permissible however
Less powerful than a cloud based software option

15. Bridging software Cost tends to be around £40+VAT per year
Operates by taking each part of the VAT return form and then directing the business to link it to the relevant cell within the spreadsheet
Example:
VAT registration number = link to cell A4
Box 1 (Output VAT payable) = link to cell E187
Box 4 (Input VAT claimed) = link to cell L133 and so on
The business would then enter their HMRC account details (User ID and password) into the bridging software and then be able to submit the VAT return.
Have a look at Absolute Excel VAT Filer

16. Penalties
There will be a “soft landing approach” for the first 12 months
No penalties will be charged in the first 12 months if businesses aren’t maintaining records digitally
Points based system to apply from April 2020

17. Thank you Any questions?
Tim Woodgates – Associate at Moore Stephens East Midlands
Offices in Corby, Peterborough and Northampton