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Making Tax Digital for VAT

08 November 2017

For those of you who are still keeping manual records and refusing to buy an accounting software package to record your bookkeeping transactions, be warned, your days are numbered. Like it or not, digital record keeping is coming and it's worth planning for this now.

With effect from 1 April 2019, all VAT registered business with turnover above the VAT registration threshold (currently £85k) will be required to:

  • maintain their VAT records digitally and 
  • send their quarterly VAT returns to HMRC using third party commercial software

Digital Record Keeping

Keeping digital records doesn’t mean that you have to scan every receipt and invoice. It does mean that you will need to make a digital record of every transaction you make, for instance, by entering the details into an accounts software package.

Quarterly Returns

The quarterly returns must be made using HMRC compatible software. Compatible software will be able to:

  • keep records in a specified digital form (the records must be kept for 6 years)
  • create a VAT return from those records and send this electronically to HMRC
  • provide HMRC with VAT data on a voluntary basis
  • receive information from HMRC (such as payment and return reminders)

Compatible Software

Springfords are up to speed with the many on-line cloud accounting packages on the market, such as Xero, Quickbooks, SAGE One, and Freeagent, all of whom are already in discussions with HMRC to ensure their packages will be compatible. Though a word of caution; as these packages vary in functionality and price, just be sure to check with us first what’s best for you.

The benefit of these cloud accounting packages is that they enable the VAT return to be generated automatically from the digital records and also offer the ability to import your bank statements at the click of a button, making life much simpler and record keeping much faster. So they're well worth considering.

Plus, keep in mind that there are ways to make your record keeping easier, particularly if you opt for a cloud based package:

  • Keep a separate business bank account and don’t use this for personal expenditure
  • Ensure all business receipts and expenses are paid into/out of the business account, preferably by direct payment/debit card rather than cheque 
  • Keep bank receipts intact (don’t deduct amounts to pay for small expenses)
  • Keep a separate petty cash system where cash is withdrawn separately

If you need any further advice on the proposed changes, please don’t hesitate to contact


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