March 1, 2019 Making tax digital: Are you ready
The clock is ticking and time is running out fast, are you ready? No we’re not talking about Brexit here, but rather the more certain deadline of making tax digital which comes into effect on 1 April 2019. From that date onwards, the majority of VAT registered businesses with a taxable turnover in excess of £85,000 will be required to keep digital accounting records and to use compatible software to submit their quarterly VAT returns.
Businesses listed below with a more complex VAT structure have a deferred start date of 1 October 2019:
- is part of a VAT group or VAT Division
- is based overseas
- is a trust
- is a not for profit organisation that is not set up as a company
- submits annual returns
- is a local authority
- is a public corporation
- makes payments on account
- uses the VAT GIANT service
Those businesses which fall under the new regulations will no longer be able to manually input VAT returns into HMRC’s portal. Instead they will either have to use the services of an accounting specialist or subscribe to a software package which is compatible with making tax digital. In addition to submitting returns using a compliant package, HMRC also requires businesses to maintain a seamless digital link from the original accounting records through to the submitting program.
This could have proved problematical for those maintaining the services of a tax agent or accountant. However, VAT notice 700/22 which was published on 13 July 2018 noted that HMRC will allow the emailing of a spreadsheet containing digital records or the transfer of a set of records onto a portable device such as a flash drive as being an acceptable digital link. That is good news for those 90% of VAT registered businesses which a HMRC survey from February 2019 revealed were using the services of a tax agent or accountant to support their accounts. To help businesses with the transition to the new programme HMRC have stated that they will not insist on a digital link for accounting periods up to 31 March 2020.
Making tax digital for VAT is the first in a move towards digitising all tax returns. However, in response to concerns raised about the pace of change the government has confirmed that the programme will not be expanded until at least April 2020. In advance of this, HMRC are running a making tax digital pilot for income tax which is open to self-employed businesses and landlords.
Elemental CoSec can act as a ‘one stop shop’ for your UK tax and accounting compliance needs including VAT registration, compliance and submission. Contact us to discuss how we can help you with your Making Tax Digital preparations.