Can I continue to use spreadsheets to record VAT transactions after the introduction of Making Tax Digital?

Q. Can I continue to use spreadsheets to record VAT transactions after the introduction of Making Tax Digital?

A. Making Tax Digital (MTD) for VAT requires business registered for VAT with turnover in excess of the VAT registration threshold, currently £85,000, to keep records in a digital form and to submit VAT returns electronically using specified software.

MTD will be introduced with effect from 1st April 2019, and if your annual taxable turnover exceeds the VAT registration threshold after this date, you will be required to record your VAT transactions on a suitable commercial software product or appoint an agent to submit VAT returns to HM Revenue & Customs on your behalf, for the purposes of MTD.

Businesses with taxable turnover that has never exceeded the VAT registration threshold are not required to keep digital records under MTD at this stage.

Considerably more businesses now keep records digitally, however MTD requires that the software used by businesses must be API (Application Programming Interface) enabled in order that data can exchanged with HM Revenue and Customs systems.

The use of spreadsheets to record VAT transactions is permitted. If a spreadsheet is used, you will need to make sure that this is API enabled or is used in conjunction with a MTD compatible software product.

There must be a ‘digital link’ between the spreadsheet and compatible software (i.e. data must transfer automatically) however HM Revenue & Customs have stated that a ‘soft landing period’ will apply for VAT periods commencing up to 31st March 2020. During this period, where a digital link has not been setup between the pieces of software, HM Revenue & Customs will accept the use of cut and paste as being a digital link.

Rennie Welch LLP accept no liability on the basis of this article and detailed advice, taking into account individual circumstances, should be obtained before entering into any transaction.

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