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Making Tax Digital for VAT - How will it affect you?

Alison Birch, VAT partner at Mitchell Charlesworth reminds businesses that the Government’s new rules around Making Tax Digital come into force in less than three months, leaving limited time to prepare for these rules which require businesses to keep their VAT records digitally and submit their VAT return to HMRC through Making Tax Digital compatible software.

By now you will no doubt have heard about the new tax regime coming into force with effect from 1st April 2019. Making Tax Digital for VAT is intended to make the UK tax system more effective and efficient and businesses that are VAT registered with a turnover over the £85,000 VAT threshold on 1 April 2019 will be required to comply with new digital regulations. This will impact dramatically on the majority of businesses who are registered for VAT. There is a 6-month delay for certain VAT registered businesses (e.g. VAT groups, unincorporated ‘not for profit’ organisations, trusts etc.).

The steps you need to take to get ready for April 2019 will depend on what software you use currently. Many businesses will already be using accounting software that has been tested and approved by HMRC, in which case the steps needed for April 2019 will be minimal. However, it is still important to review your VAT return process to check that it complies with the 2019 requirements and identify what additional changes may be required to comply after the soft landing period has expired in 2020. Businesses that are not using accounting software or using software that is not compatible will have to take action to comply with the changes and avoid penalties. Consideration will have to be given as to whether to move to a compatible software provider or keep their existing system/spreadsheet and utilise bridging software or compatible (API enabled) spreadsheets to submit the VAT returns to HMRC. 

Although invoices can be stored in hard copy, a digital record of sales and purchases is mandatory and therefore, any business keeping written records of sales and purchases will need to make significant changes.

If you are impacted by Making Tax Digital you may be interested in watching our short webinar produced by our Making Tax Digital team which provides an overview of the new legislation, and addresses the main queries and concerns that businesses have about the new way in which to administer their VAT from 1 April 2019:

Even though the first VAT return to be filed under the new regime for most businesses is not until the VAT period starting on or after 1 April 2019, we would strongly recommend that you begin to prepare for the changes sooner rather than later to avoid any potential backlogs early next year as businesses rush to become compliant.

We understand that this may be a considerable change for businesses and, as a result, we have developed a Making Tax Digital readiness review which will help businesses understand what will be required to remain compliant and avoid penalties. 

If you would like to discuss Making Tax Digital in more detail or enquire about a readiness review please contact our Making Tax Digital team, which consists of VAT specialists and cloud accounting specialists to ensure that your business is compliant with the new requirements and also to help you introduce efficiencies into your processes.

Author Alison Birch is a member of our Making Tax Digital team.

Written 9 January 2019.

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