Making Tax Digital (MTD) – A guide for independent opticians

Making Tax Digital is just around the corner. Here is our summary of the changes and what this means for independent opticians.

What is MTD?

Making Tax Digital is the UK government’s initiative to take all tax submission online and to therefore enforce digital record keeping via computer software.

Does MTD apply to me?

If your taxable turnover is above the VAT registration threshold, it applies to you with effect from 1 April 2019.

When does MTD start?

The Making Tax Digital rules apply from your first VAT period starting on or after 1 April 2019. A ‘VAT period’ is the inclusive dates covered by your VAT Return.

What records must be kept for MTD?

You must have a digital record of:

o your business name

o the address of your principal place of business

o your VAT registration number

o any VAT accounting schemes that you use

For each supply you make or receive you must record the:

o time of supply (tax point)

o value of the supply (net value excluding VAT)

o rate of VAT charged

This only includes supplies recorded as part of your VAT Return. Supplies that do not go on the VAT Return do not need to be recorded in functional compatible software.

You may authorise HMRC to receive data from (and send data to) an agent on your behalf in relation to any Making Tax Digital service eg accountant.

What digital links are allowed for MTD?

The complete set of digital records to meet Making Tax Digital requirements does not all have to be held in one place or in one program. Digital records can be kept in a range of compatible digital formats. Taken together, these form the digital records for the VAT registered entity.

Once data has been entered into software used to keep and maintain digital records, any further transfer, recapture or modification of that data must be done using digital links. Each piece of software must be digitally linked to other pieces of software to create the digital journey.

HMRC will also accept digital links as:

o emailing a spreadsheet containing digital records to a tax agent so that the agent can import the data into their software to carry out a calculation (for instance, a Partial Exemption calculation)

o transferring a set of digital records onto a portable device (for example, a pen drive, memory stick, flash drive) and physically giving this to an agent to import that data into their software

o XML, CSV import and export, and download and upload of files

o automated data transfer

o API transfer

HMRC will allow a period of time (‘the soft landing period’) for businesses to have in place digital links between all parts of their functional compatible software. For the first year of mandation (VAT periods commencing between 1 April 2019 and 31 March 2020) businesses will not be required to have digital links between software programs.

Making Tax Digital in Summary

o You or your agent (e.g. accountant) must post VAT returns digitally from 1st April 2019 using HMRC approved software, usually an accounts package e.g. Sage, Xero etc.

o You will need a digital audit of all supplies that you make or receive that are subject to VAT from 1st April 2019 i.e. everything you buy and sell.

o You or your agent’s accounts package provides the digital audit for everything you buy.

o The Optisoft Cash module provides the digital audit for everything you sell.

o These systems will need to be digitally linked, but not for another year yet, so you can continue to post manually and Optisoft will provide the link within that period.

Read our latest MTD update here.