What does Making Tax Digital for VAT mean?
HMRC have introduced compulsory digital VAT filing and record-keeping requirements for all UK VAT-registered entities with an annual turnover of more than £85,000. This includes overseas businesses without a UK permanent establishment.
What has actually changed?
Businesses in scope will no longer be able to keep manual records. The new rules will require almost all UK VAT-registered businesses to keep ‘digital records’ and file their VAT returns via ‘functional compatible software’. This will capture more information than is currently required to be reported. Businesses can no longer manually enter the VAT return figures onto the HMRC portal.
Does it change when or how often I need to file?
There will be no changes to the deadlines or frequency of VAT return filings, however VAT returns must be submitted to HMRC by means of this software.
When do the new rules come in?
The new rules come into force on 1 April 2019, however a ‘soft landing’ approach for digital links in the first year will give businesses time to become fully compliant. In VAT periods commencing between 1 April 2019 and 31 March 2020, a digital link will only be required between the software containing data for the VAT Return boxes to the bridging software.
The requirement for a digital connection into underlying records will not come into force until 1 April 2020. It is important to note that there is no soft-landing period for the digital submission of the VAT return.
Is there anything else to think about?
The implementation date clashes with the expected Brexit date (29 March 2019) which is certainly not ideal. This may mean that any businesses with cross-border trade may need to deal with the effects of this and Brexit at the same time.
What should businesses do about it?
It is very important for UK VAT-registered businesses to review their current systems to try and identify areas where digital links will be required. Although some digital links may not be compulsory until 1 April 2020, businesses should try and look into this as much as possible now.
Please do feel free to get in touch if you have any specific questions in connection with the above.
Farley Kaye FCA
Managing Partner
For more information please contact Farley:
farley.kaye@fkgb.co.uk
052 627 7472
