The new Making Tax Digital for VAT (MTDfV) rules came into effect on the 1 April 2019. The new rules require businesses with an annual VAT-taxable turnover above £85,000 to keep digital records for VAT purposes, and to submit their VAT return to HMRC using MTD-compatible accounting packages, such as QuickBooks.
The HMRC scheme will ultimately require all taxpayers to move over to digital filing. However, at the moment, there is no proposal to widen compulsory MTD until at least April 2021.
Mel Stride MP, Financial Secretary to the Treasury, has said:
‘In a world where businesses are already banking, paying bills and shopping online, it is important that the tax system moves into the 21st century.’
Although the new rules are now applicable, VAT registered businesses with more complex requirements will not have to comply until the start of their first VAT return period after the 30 September 2019.
The government has also confirmed that there will be no penalties regarding the first year of digital filing and record keeping, in cases where a VAT registered entity has tried to comply with the digital record-keeping requirements and has failed due to software-related issues.