By April 2019
Law firms must submit their VAT returns digitally using an application-programming interface (API). Manual entry of the VAT return figures from spreadsheets to HMRC's online portal, for example, will no longer be allowed.
Law Firms must also maintain records (certain transactions, VAT accounts and summary of outputs) digitally for VAT only. Some data will already be in existing systems; however some will be in spreadsheets. These both count as digital, so for most law firms this will be a minor change. Law firms should consider reviewing their data flows and perform a spreadsheet audit to ensure there are no MTD gaps.
Law firms will need to have a clear 'digitally linked' audit trail from the transaction records to the VAT return filing. This is a marked shift and will require manual transpositions to be removed from the VAT process. Law firms should consider performing a readiness review and/or a data integrity review to ensure that the data being entered is correct in the first instance, and consider introducing processes that reduce manual intervention and adjustments after the end of the relevant VAT return date.
As set out in HMRC's 2016 papers, HMRC will merge this MTD approach to other taxes, consider increasing the scope of digital records, and require greater disclosure of transactional level data. HMRC's ultimate goal is to access data remotely, then conduct VAT, and tax audits via a number of analytical checks.