With only a couple of weeks to go until the 1 April Making Tax Digital (MTD) deadline, Emma Chesson, our Head of Online Services, gives an update on what you need to know, now.
HMRC have now updated the VAT notice for MTD and issued further guidance for taxpayers who consider themselves to be exempt. This guidance covers where:
- It’s not reasonably practicable for you to use digital tools to keep your business records or submit your VAT returns because of age, disability, remoteness of location or for any other reason.
- You or your business are subject to an insolvency procedure.
- Your business is run entirely by practicing members of a religious society or order whose beliefs are incompatible with using electronic communications or keeping electronic records.
The notice goes on to state that HMRC will not give an exemption purely on the basis that reasonable effort, time and cost may be involved in making the transition to Making Tax Digital, for example choosing and buying any new hardware or software or learning to use them.
Those under the threshold or those already exempt from filing VAT returns online do not need to apply for an exemption.
To find out more about how to claim for an exemption click here.
As a reminder the current VAT portal will remain open for those VAT registered businesses that are under the threshold and have opted in voluntarily.
It seems that some of the businesses that meet the criteria for the six month deferral have received letters from HMRC with a mandation date of 1 April. If you are one of these and wish to take advantage of the deferral period you can write to HMRC to inform them.
HMRC must have written to you to confirm your deferral.
What to do now
If you are not yet on a system that is MTD compliant it is important that you have a plan in place for how you will deal with MTD now. HMRC have indicated that they will apply penalties for those that don’t comply.
If you are changing systems it is best to have this set up ready to use from the start of the first return affected, which will be the first VAT period beginning after your mandation date. For example, if you are mandated from 1 April 2019 and have a 30 April 2019 VAT quarter end you ought to have the system in place ready for use from 1 May 2019 i.e. the first return that would fall under MTD.
If your system is not MTD compliant and you need to find an alternative way of filing returns under MTD you may need bridging software.
Bridging software is a digital tool capable of creating the necessary link to HMRC, to transmit the required VAT information from a business’s current software package to HMRC. A spreadsheet alone will not be compliant during the interim period unless it has the capability to create a digital link or an application program interface (API) with HMRC itself.
By April 2020, digital links will need to be implemented for each step taken from the digital VAT record through to the return submission. So, depending on what bridging solution you use, and how you use it, Bridging can be an efficient short term fix for some but a longer term solution for others.
We will be holding a webinar in conjunction with AlphaBridge on Wednesday 27 March (10:00am-11:00am) where we will be recapping on MTD and demonstrating how Bridging can work during the soft landing phase and beyond 2020.
We would recommend the webinar to all clients and if you would like to attend please use the joining instructions below:
Please join our meeting from your computer, tablet or smartphone. https://global.gotomeeting.com/join/787761597
You can also dial in using your phone.
United Kingdom: +44 20 3713 5011
Access Code: 787-761-597
Registering for MTD
Businesses that are subject to MTD will need to register for this with HMRC online. It is important to get the timing of this right and not register too early (unless you would like to sign up earlier). You need to wait until the deadline has passed for your last VAT return under the old rules and any payment has cleared before registering.
Once you have registered HMRC will contact you within 72hrs. You must wait for this confirmation before submitting your next return.
We have put some detailed guidance on our website on how to set up your new VAT account for MTD which can be found here.
For further information please speak with your usual Kreston Reeves adviser or Emma Chesson here or on +44 (0)330 124 1399.
Join over 8000 businesses and individuals who receive our complimentary e-bulletins by signing up here.