22
November
2018
Businesses whose taxable turnover exceeds the VAT Registration Threshold will need to keep their records digitally, using Making Tax Digital (MTD) functional compatible software, and create the VAT return from that (or a combination of) software, for return periods starting on or after 1 April 2019. The announcements in July 2017 around Making Tax Digital now place VAT firmly at the vanguard of these proposals. Finance (No.2) Act 2017 includes legislation providing for the introduction of MTD for VAT. Notice 700/22: Making Tax Digital for VAT which provides further explanation of the requirements was published in July 2018. HMRC have also compiled a list of MTD for VAT software suppliers that is updated regularly as new software suppliers complete the testing process. The main details are: - Record Keeping Keeping manual records will not be acceptable therefore digital records must be maintained in what is defined as ‘functional compatible software’. This is software or spreadsheets (or a combination) which can connect to HMRC via an Application Programming Interface (API) and these must be capable of capturing more information than HMRC currently requires to be recorded. Submitting VAT Returns VAT returns must be submitted to HMRC by means of a business’s functional compatible software communicating digitally via HMRC’s API platform and not by manually entering the VAT return figures onto the HMRC portal as carried out currently. The figures from the accounting software should not be manually rekeyed into another package (say) a spreadsheet, which would ordinarily deal with VAT adjustments or combination of data sources, but those figures should be transferred digitally. There will be a “soft landing” in the first year of MTD, allowing more time for these digital links to be put in place. ‘Cut and paste’ (and ‘copy and paste’) can still be used during the soft landing period but not for VAT periods commencing on or after 1 April 2020. Timing MTD for VAT is still expected to take place on 1 April 2019, which is the same time as the UK leaves the EU. Hitting this his date will be challenging, for HMRC, particularly as software trials have, until last month, been in the private pilot stage on a very small scale and are only now commencing the public pilot stage. Initially, this pilot is for smaller businesses, but it will be open to large business and public sector bodies later in the year, which may mean that the latter businesses only have one VAT return period for testing before MTD for VAT goes live. To join the pilot visit the Making Tax Digital pilot for VAT. 6-Month Deferral For a small minority of businesses that have more complex requirements, HMRC has made the decision to defer MTD for VAT by 6 months to ensure there is sufficient time for testing the service with them before they are mandated to join. These businesses have until 1st October 2019 to start keeping records digitally and using MTD-compatible software to send their VAT returns to HMRC. The... Please LOGIN to read the full article.
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