What is it?
Making Tax Digital for VAT introduces new digital filing and record keeping requirements for VAT.
It is compulsory for all entities that are VAT registered in the UK and have an annual taxable turnover exceeding £85,000.
See blog Making Tax Digital for VAT for full details.
What is specifically required?
There need to be digital links from the underlying data all the way to the final data sent to HMRC.
Requirements for keeping digital records include recording for each transaction the time of supply, VAT exclusive value, the rate of VAT charges, or input tax to be claimed.
When does it come into force?
The requirement to create a digital link to the bridging software comes into force for VAT periods commencing on or after 1 April 2019.
However, HMRC wants to spend more time preparing its systems for organisations with more complex VAT affairs:
- Trusts and ‘not for profit’ organisations that are not set up as a company
- VAT divisions and VAT groups
- public sector entities required to provide additional information on their VAT return
- local authorities
- public corporations
- traders based overseas
- those required to make payments on account (very large traders)
- Annual Accounting Scheme users.
The above taxpayers will be deferred from being subject to Making Tax Digital for VAT for six months (i.e. for VAT periods commencing on or after 1 October 2019).
HMRC has recently written to businesses to notify them of their obligation to use Making Tax Digital for VAT, and to confirm whether they fall into the April or October phases of the rollout.
For those who have received the letter confirming that they fall in the October phase, the letter contains a specific legal direction from HMRC authorising them to keep using the existing VAT portal after 1 April 2019.
The requirement for a digital connection into underlying records, such as purchase and sales ledgers, comes into force 12 months later, on 1 April 2020. HMRC has now confirmed that this deadline will be extended to 1 October 2020 for the more complex businesses. This is to ensure that all Making Tax Digital for VAT users have a full 12 month ‘soft landing period’.
How can you prepare?
- Confirm the date on which Making Tax Digital for VAT becomes compulsory for you.
- Review your current accounting systems so as to identify areas where digital links will be required.
- Consider precisely what data you will have to share with HMRC as a consequence of Making Tax Digital for VAT, and review the quality of that data.
- Decide which software you wish to use to help with your online filing.
We have significant experience in this area, and are here to help any businesses who need guidance in this respect, or assistance in filing VAT returns.
Farley Kaye FCA
Managing Partner
For more information please contact Farley:
farley.kaye@fkgb.co.uk
052 627 7472
