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Business Services  •  Small Business

Making Tax Digital Update: VAT Registered Businesses

By RJP LLP on 31 May 2018

Online Filing of VAT Returns to be Compulsory

Starting from 1 April 2019, online VAT reporting will be introduced within the government’s new Making Tax Digital system. This affects all businesses with a turnover above the £85,000 VAT compliance threshold.

From 1 April 2019, affected organisations will have to:

  • keep their VAT records digitally;
  • submit their VAT data electronically to HMRC through compatible software and not through the HMRC online portal.

There are currently no plans to change the frequency of VAT returns or payment deadlines and this will remain a quarterly obligation. The exact starting date will be dependent upon the existing VAT return periods in use.

What counts as ‘functional compatible software’?

To facilitate the process, all VAT registered businesses must be using ‘functional compatible software’ in order to make the required submissions. According to HMRC’s definition, functional compatible software is a software program or set of compatible software programs that must be able to:

  • record and preserve electronic records in an electronic form for up to six years;
  • create a VAT return from the digital records;
  • provide to HMRC information and returns from the electronic records in an electronic form and by using an Application Programme Interface (API) to link to HMRC’s systems;
  • receive information from HMRC.

Widely available software examples include Sage, Xero and Quickbooks.

If you have any questions about VAT compliance under Making Tax Digital, please contact us by emailing partners@rjp.co.uk.

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Online Filing of VAT Returns to be Compulsory

Starting from 1 April 2019, online VAT reporting will be introduced within the government’s new Making Tax Digital system. This affects all businesses with a turnover above the £85,000 VAT compliance threshold.

From 1 April 2019, affected organisations will have to:

  • keep their VAT records digitally;
  • submit their VAT data electronically to HMRC through compatible software and not through the HMRC online portal.

There are currently no plans to change the frequency of VAT returns or payment deadlines and this will remain a quarterly obligation. The exact starting date will be dependent upon the existing VAT return periods in use.

What counts as ‘functional compatible software’?

To facilitate the process, all VAT registered businesses must be using ‘functional compatible software’ in order to make the required submissions. According to HMRC’s definition, functional compatible software is a software program or set of compatible software programs that must be able to:

  • record and preserve electronic records in an electronic form for up to six years;
  • create a VAT return from the digital records;
  • provide to HMRC information and returns from the electronic records in an electronic form and by using an Application Programme Interface (API) to link to HMRC’s systems;
  • receive information from HMRC.

Widely available software examples include Sage, Xero and Quickbooks.

If you have any questions about VAT compliance under Making Tax Digital, please contact us by emailing partners@rjp.co.uk.