MAKING TAX DIGITAL (MTD) FOR VAT
The regulations for MTD for VAT are now in place, so we are now full steam ahead. From 1st April 2019, MTD for VAT became a requirement under UK legislation. Up until now, there seems to be more questions than answers around the whole process. It cannot be argued that making changes to comply with these new requirements is a big ask, especially for small businesses and their agents. Planning how this will fit into our daily practice on top of the usual demands of running a business can be a daunting and stressful time. This is by no means an exhaustive list, however, I have listed a few of the common questions I have been asked:
Who exactly is mandated to follow these requirements?
These new requirements apply to all businesses with a taxable turnover above the VAT threshold. This can be anyone from a landlord to a large limited company. Only compulsory VAT-registered businesses will be required by law to comply.
Can I still use spreadsheets as I do now with these requirements?
In short – yes spreadsheets can still be used. Spreadsheets are a digital record, however, businesses now must send a summary of the information in these spreadsheets to the HMRC using functional compatible software. Therefore, a spreadsheet alone is no longer enough. Even at this late stage, a lot of questions surround the software and the cost of purchasing it. To put it simply, the software will link excel spreadsheets and provide HMRC with the required information.
How will this deadline date of 1st April work in practice?
VAT returns commencing on or after 1st April 2019 will be affected. So, a business with a VAT quarter that begins on 1st March 2019 will not have to comply with MTD for that quarter. However, their next quarter beginning on 1st June 2019 will have to comply.
MTD is a big ask, especially for my small business. Are there any exemptions? What if I don’t have the necessary knowledge or facilities for the use of software?
HMC have said that existing exemptions for the ‘digitally excluded’ will continue to apply. Those who are unable to use computers due to religious grounds, age, disability or remoteness of location, with the agreement of HMRC, will be able to provide figures over the phone.
What if I don’t comply?
HMRC have said that there will be a ‘soft landing approach’ in the first year. Effectively, this means that they will not be taking a heavy handed approach with regards to penalties for non-compliance. However, from April 2020, HMRC will be introducing a system of penalty points. An accumulation of penalty points will result in a fine. These points will, however, expire after a period of good compliance.