The HMRC’s Making Tax Digital movement for VAT is scheduled to come into play during April 2019. From April 2019, fundamental changes to the processes of submitting a VAT return should be expected.
In order to ensure our clients are fully informed about all of the Making Tax Digital Movements, we will be running a series on our blog that includes all of the latest announcements and changes.
Failing to coordinate with the Making Tax Digital changes correctly can result in fines and unnecessary stress.
In the pursuit to become a world-leading digital tax authority, the HMRC plan to make Making Tax Digital to all VAT schemes and registrations. This will include annual, retail, flat rate, partial exemptions and all other areas of VAT.
Who has to comply to MTD for VAT in 2019?
Businesses with taxable income above the VAT registration threshold will be required to comply with the new guidelines, this will include having to:
· Keep records digitally (for VAT purposes only)
· Provide VAT returns information through MTD compatible software
For companies below the income threshold, it will not be compulsory to file in accordance to Making Tax Digital, however businesses may also opt to file their VAT returns under to regime.
Exemptions that are already applied to electronic VAT returns will be extended to cover digital recordkeeping requirements. This includes businesses:
· Who the Commissioners are satisfied is practice members of religious society or order whose beliefs are incompatible with the use of electronic communications
· For whom the commissioners are satisfied it is not reasonably practicable to make a return system for reasons of disability, age, remoteness of location or any other reason not required to make a return required by regulation 25 using an electronic return system.
How MTD will change how businesses file a VAT return
Businesses who fall under categories required to comply with MTD must use ‘functional compatible software’ to meet the HMRC’s requirements. Software should allow the organization to maintain digital business records and relevant VAT information electronically.
The HMRC have not disclosed a full definition of what falls into ‘functional compatible software.
Digital record keeping
Businesses will be required to keep and preserve VAT records digitally. For businesses within the scope of MTD, records that relate to the period between mandation and deregistration must be preserved digitally for up to 6 years.
Digital records should include:
· Business names, principal place of business and VAT registration number
· The VAT account that each VAT registered business must keep, by law- the VAT account is the link- the audit trail- between primary records and the VAT return
· Information about supplied made and received
VAT will contain a lot more information
One of the most significant changes to filing VAT after April 2019 is the wider range of information you will be required to report.