As a VAT registered hospitality business, keeping your book-keeping records in digital format will be mandatory from April 2019.   All businesses, whether sole trader, partnership or limited company, which are VAT registered and trading over the VAT threshold will be required to use compliant software for the purpose of submitting their VAT Returns.  There is no choice in the matter, this is compulsory.  The current on-line HMRC VAT Account will not meet the new requirements.

It may be a year away but this is why you need to act now

Easter was early this year but hopefully the tourists will turn out following a winter of exceptionally bad weather, particularly in Saint and Co’s homeland of the Lake District and Dumfries & Galloway.

Next year Easter falls later between 19th and 22nd April 2019.  Spring should be in full bloom by then and bookings should be in abundance.  With lots of guests to look after, the last thing you will want is to have to get to grips with a new accounting system so you can submit your first VAT Return for the period after 1 April 2019 digitally!!!

It is, therefore, essential to learn about and think about how you are going to deal with MTD now.

In an ideal world I would recommend making the switch to compliant digital software from the beginning of your next financial accounting year.  This will mean that you will have had time to get used to the new system and can deal with any teething problems without getting into a state of panic.  It will also make production of the annual accounts easier if your financial year end is after 1 April 2019 – otherwise the accounts may have to be produced from data on two different systems which is cumbersome and expensive.

An ideal world, however, is not always possible and with the 2018 Season getting underway the best thing you may be able to do now is arm yourself with the facts and plan to take action at the end of the Season in say October 2018.

I set out below some pertinent facts about Making Tax Digital:

What is digital record-keeping

Eventually every taxpayer whether business or individual in the UK will have a Digital Tax Account set up with HMRC.  This Digital Tax Account will hold information HMRC has gathered from other sources relating to payroll, interest, dividends etc so there is no need to separately declare this income on a tax return.  All tax data will be held in one place on the Digital Tax Account

Business accounting records need to be kept on specialist commercial software which will keep the data in digital form.   It will create a VAT Return from the digital records.  This will enable a seamless flow of data from the business to HMRC and vice versa.

Bank statements can be either fed directly into the software or imported.

Spreadsheets can be used but you will need to acquire software which will allow returns and updates to be made directly from the spreadsheets.

Paper records will no longer be sufficient.

Why is this happening?

The UK tax system is known as one of the most complex in the world.  The Government, therefore,  plans to transform the tax system so it is more effective, efficient and simpler for taxpayers.  MTD is intended to improve the accuracy of business records and minimise errors.

Timing of First Digital VAT Return

Applies to the first VAT period starting on or after 1 April 2019

Monthly returns

If you are on monthly returns your first digital VAT Return will be for the month of April 2019.

Quarterly returns

VAT stagger period 1st Digital Return
March/June/Sep/Dec 30 June 2019
April/July/Oct/Jan 31 July 2019
May/Aug/Nov/Feb 31 August 2019

Annual Returns

Users of the annual accounting scheme will only have to submit one digital report and those with a 31 March accounting period end will have to submit their first digital VAT Return for the year ended 31 March 2020.

It may be appropriate to re-consider your hospitality business’ financial year end, VAT stagger or even a switch to Annual Returns in readiness for the change to MTD.

How much will it cost?

Businesses need to buy their own software so you need to decide what system you would like to acquire.  There are around 75 providers who have been working with HMRC on producing the required software.  The software is not overly expensive to purchase and is generally acquired on a monthly subscription basis.  Whilst most of the systems are similar, Saints Tourism & Leisure have been using “Xero” for some time now.  There are two Xero packages suitable for VAT registered businesses as follows:-

Plan/Package Price per month exc. VAT
Simple VAT Cash book £9
Full VAT package with Purchase Ledger £22

How is this going to be enforced?

A points based system is to be put in place to deal with late digital submissions [along similar lines to driving offence points].  Once points have been accumulated up to a certain threshold a penalty will be charged for every subsequent late submission – the Government has yet to announce the penalty amount!  They have, however, indicated that they will be lenient for the first 12 months.

Download and complete a simple questionnaire and we will let you know about the best way for you to deal with MTD for your hospitality business.  Send your completed questionnaires to us at the Carlisle Office or email to