As this will be our final newsletter prior to the new tax regime that comes into force on 1 April 2019, Alison Birch, VAT partner at Mitchell Charlesworth, reminds businesses about the Government’s new rules around Making Tax Digital and how charities should prepare for these rules, which require businesses and certain charities to keep their VAT records digitally and submit their VAT return to HMRC through Making Tax Digital compatible software.
HMRC have introduced a deferral until October 2019 for certain VAT registered traders, this includes not for profit organisations that are not setup as a company, trusts, VAT groups, annual accounting scheme users and those required to make payments on account. Unless included in the deferral group, charities must comply from April 2019 and they will need to maintain their records digitally and submit their VAT returns via API to HMRC. This can either be by using compatible software, or API enabled spreadsheets.
Whilst HMRC have stated that there will be a ‘soft landing’ period for the first year following the introduction of the new regime, and that they will not penalise charities for non-compliance, this concession only applies to the digital link between packages or interfaces. The required records must be stored digitally and the VAT return must be submitted via API enabled software from April 2019. As a result, if the software being used by the charity is not compatible, consideration needs to be given as to whether an additional piece of software is required to facilitate compliance. HMRC have confirmed multiple systems can be used to comply with the MTD requirements but that there must be a digital link between these systems and it is this digital link only that the soft landing applies to.
Watch our webinar
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. Watch our webinar here.
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.
Please contact Alison if you would like further information about this.