Making Tax Digital is the most fundamental change to the administration of the tax system for many years.The transformation will start with Making Tax Digital for VAT from April 2019. If your business turnover is above the VAT threshold, then you need to make sure your systems will be compliant. That means you need to start to get organised now.
HMRC’s vision to digitalise the UK tax system is underway. The transformation will start with Making Tax Digital (MTD) for VAT from April 2019.
After MTD for VAT has been implemented, MTD for income tax (for the self-employed and those with income from property) and MTD for corporation tax are expected to follow, but not before April 2020 at the earliest. HMRC is also running an MTD for individuals transformation project.
The essential elements of MTD are:
We will of course keep you updated on any future announcements and as more information is released on future timelines for MTD. In the meantime, we strongly recommend that if you are not currently maintaining your VAT records digitally, that you read the following information and talk to us should you need any help or advice.
From 1 April 2019, businesses will be mandated to use the MTD for Business system to meet their VAT obligations – termed Making Tax Digital for VAT (MTDfV). Currently, only businesses with a turnover above the VAT threshold (currently £85,000) will be required to use MTDfV. The legislation affects all businesses regardless of its legal structure – company, charity, trust, partnership, sole trader, LLP or public body.
Records will need to be kept using ‘functional compatible software’. ‘Functional compatible software’ can be a spreadsheet or software (or a combination of the two) that will allow the user to connect to HMRC via an Application Programming Interface (API).
VAT returns – how will they be submitted
Those businesses that fall within the scope of MTDfV will no longer be able to manually enter VAT figures onto the HMRC portal. Returns must now be submitted through business functional compatible software, which will be communicating digitally through HMRC’s API platform.
Who is exempt from these changes?
There are exemptions for groups who can’t engage digitally for religious reasons or due to factors such as age, disability or location (e.g. no availability of broadband). These exemptions mirror the current exemptions for VAT online filing.
Using third party software and keeping digital records
Under MTDfV, businesses must make use of functional compatible software to meet the new requirements. VAT returns will be calculated and submitted to HMRC via the API platform. Returns will be able to be submitted using software, bridging software or API-enabled sheets.
Will there be penalties for non-compliance?
In April 2019, when MTDfV comes into effect, HMRC will allow a ‘soft landing’ in the first twelve months, which will give more time to allow digital links to be put in place. Cut and paste of records can be used during this period.
What action should my business be taking?
How can we help?
MTDfV may sound daunting, but as accountants and business advisers we are here to help your business be ready and fully compliant with these fundamental changes to VAT submissions. We can:
We strongly recommend businesses, especially those using paper based reporting systems and spreadsheets, that they speak to us as soon as possible to assess their current VAT processes and help them look at some of the key cloud accounting packages that are available.
Thompson Jenner LLP will be running MTDfV seminars in Exmouth and Exeter during October looking at MTD and how it will affect your business. Read more about our seminars and to register your place.
We would love to meet you, which is why we offer all new clients a free, no obligation initial consultation. Click the contact button below to see all the methods to get in touch with us and if you like you can leave an email enquiry with the form provided and we will contact you to arrange a time and date.Contact Us