19th June 2018

With less than a year to go until the introduction of HMRC’s Making Tax Digital for VAT scheme, businesses must be aware of the significant changes to the way they will be required to submit their VAT returns from next spring. UNW VAT Partner Mark Hetherington outlines some of the steps businesses should take to ensure they are fully compliant with new rules to avoid potential penalties from HMRC.

The welcome decision to delay, or in some cases even shelve completely, certain elements of the wider roll-out of MTD was made in January 2017 after a report by the Treasury Select Committee highlighted several concerns by business owners and agents alike. The introduction of MTD for most taxes was delayed until April 2020 at the earliest, with VAT the only short-term exception.

As it has been compulsory for VAT returns to be submitted quarterly online since 2010, HMRC probably views it as the natural first step to introducing MTD across all taxes. Any company operating with a taxable turnover above the current VAT threshold (£85,000 per annum) will be required to keep digital records for VAT purposes from April 2019. HMRC has recently rolled out pilots, with participation from a wide range of companies and organisations, to ensure everything is in place for the eventual transition.

The information businesses must provide as part of MTD will be far more extensive than before and taxpayers will therefore be required to operate ‘functional compatible software’. This will enable them to maintain digital records and file relevant VAT information electronically. It would be wise to look to implement this software now to ensure new processes are well established and any problems that may arise are addressed well ahead of schedule.

The new software will require businesses to:

  • Keep financial records in a digital format
  • Submit VAT returns to HMRC using an automated platform
  • Receive receipt of information from HMRC electronically

Speaking of his surprise that MTD for VAT purposes is being kept exempt from the delays, Mark Hetherington says: “With the advent of Brexit and the introduction of new procedures for dealing with a massive increase in import and export declarations, it is surprising that HMRC is still choosing to go ahead with MTD for VAT in Spring 2019. Despite wishful thinking there is no sign (yet) of HMRC changing tack.

“Software houses now face a race against the clock to ensure they have systems compatible with MTD for VAT and able to ‘talk to’ HMRC’s VAT portal.

“The majority of UNW clients already have manual processes in place for dealing with VAT returns, be it simple adjustments for fuel scale charges through to more complex matters involving partial exemption and VAT Group consolidation – I worry that the new pieces of software will either not be able to handle these matters or instead be cost prohibitive.”

If you would like to be kept informed of the developments of MTD for VAT, you can contact a member of our Accounting Services or VAT teams via the links below:

Accounting Services Partner
Hazel Smith, Accounting Services Partner
VAT Partner
Mark Hetherington, VAT Partner
VAT Manager
Ian Coulthard, VAT Manager
Troo

Chartered accountancy and business advisory firm UNW has helped a business energy benchmarking specialist source and secure a six-figure investment

With Brexit uncertainties clouding the forecast horizon, Chancellor Philip Hammond made the most of upgraded forecasts of tax receipts from

Boiler Plan

Chartered accountancy and business advisory firm UNW has helped Boiler Plan UK to source and secure £2.1m of Venture Capital and

Making Tax Digital

Many of you will now be aware of the impending introduction in April 2019 of Making Tax Digital for VAT

charitable donations

Interesting trends around large charitable donations have emerged after a Freedom of Information (FOI) request from private client law firm