Making Tax Digital – are property developers ready?
With the April deadline now passed, all property businesses that file VAT returns have no choice but to file those returns online and through dedicated accountancy software. And with the first VAT returns likely to be prepared in May, there is little time left to prepare.
There are 2.55 million VAT registered businesses with a turnover exceeding the £85,000 VAT threshold, most of which will be required to file VAT returns through Making Tax Digital compliant software and not via the current HMRC portal.
This requires developers and their contractors, or their advisers, to use Making Tax Digital compliant software, such as QuickBooks, Xero or Sage.
We have been talking to our developer clients about the HMRC’s Making Tax Digital programme and the recent April deadline, and it is clear that the Government’s promotion and communication to support this move has not working as well as hoped. The sector has not been as well prepared for this move as would have liked.
In research we conducted in the second half of 2018 with 530 businesses; results suggested that just 65% of businesses understand and are prepared for the changes, with just over half (53%) of the businesses surveyed using Making Tax Digital compliant software. A worrying 27% of businesses did not think their finance teams were ready for the Making Tax Digital deadline, and 19% having not heard of Making Tax Digital at all, leaving themselves at risk.
The good news is that most accountancy firms are up to speed with the government’s Making Tax Digital programme and are already using fully compliant software. If you are unsure whether your accountant is fully Making Tax Digital compliant, then ask.
If your business manages VAT returns directly, look for information and resources from your software provider. They too are up to speed with the Making Tax Digital programme and are already increasing their communications and support around this.
The residential development sector has a lot to manage this year, with negotiations around the UK’s exit from the European Union coinciding with the first Making Tax Digital VAT deadline. HMRC assures us that it is ready for the Making Tax Digital deadline but has said it will be accompanied by a soft landing, meaning that businesses are unlikely to penalised. That is not, however, an excuse for failing to prepare or for the late filing of VAT returns.
To help clients, we have provided the following quick guide:
- If your turnover exceeds the VAT threshold of £85,000 you will no longer be able to file your VAT returns via the HMRC portal. They will need to be filed via Making Tax Digital compliant software.
- Current providers of Making Tax Digital compliant software include QuickBooks, Xero, Sage.
- The information VAT returns need to include is not changing.
- Talk to your accountant and make sure they fully understand the Making Tax Digital regime.
- Make sure you have a plan in place now.
What to do now?
If you are already using accounting software make sure you are on the latest version and that it is MTD compliant. There is a list of providers that are compliant which can be found here.
If you are still not using any software speak with your accountant as soon as possible to look at your options.
All businesses that are now subject to MTD will need to register for it 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.
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