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Making Tax Digital for VAT - Update

As mentioned in our previous newsletters, HMRC is phasing in its landmark Making Tax Digital (MTD) regime, which will ultimately require taxpayers to move to a fully digital tax system. Under the new rules, businesses with a taxable turnover above the VAT threshold (currently £85,000) must keep digital records for VAT purposes and provide their VAT return information to HMRC using MTD-functional compatible software.

The new rules are now live, having taken effect from 1 April 2019 where a taxpayer has a ‘prescribed VAT return period’ which begins on that date, or otherwise from the first day of a taxpayer’s first prescribed VAT return period beginning after 1 April 2019. For some VAT-registered businesses with more complex requirements, the rules will not have effect until 1 October 2019. Included in the deferred start date category are: VAT divisions, VAT groups and businesses using the annual accounting scheme.

Old VAT returns not filed under MTD that were completed for the period ended
31 March 2019 had to be filed with HMRC by 7 May. Generally, the first MTD returns starting 1 April 2019 will be for the quarter ending 30 June 2019. These will be required for filing by 7 August 2019 (apart from any monthly returns which may have been filed earlier).

It is important that you consider registering now for MTD to give sufficient time to ensure that registration has occurred. However, the government has confirmed that a light-touch approach to penalties will be taken in the first year of implementation, advising that where businesses are doing their best to comply, no filing or record-keeping penalties will be issued as the focus will be on supporting businesses to transition to MTD. The government has confirmed that it will not be mandating MTD for any new taxes in 2020.

Rothmans are assisting clients with their registration and can assist you with the registration process as well as filing.

You will also need to connect your accounting system – such as Xero, QuickBooks or Sage, to HMRC for MTD, and we can also assist and complete this process for you.

If you use spreadsheets, these must be bridged with HMRC as spreadsheets alone are insufficient for submission. Rothmans has a bridging filing solution and can also offer support with filing MTD spreadsheet information on your behalf.

Figures published by HMRC show that almost 1.2 million businesses are affected by MTD for VAT. Financial Secretary to the Treasury, Mel Stride MP, said:

“In a world where businesses are already banking, paying bills and shopping online, it is important that the tax system moves into the 21st century.”

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