Will making tax digital affect your business?
From April next year, and under the UK Government's commitment to Making Tax Digital, all companies and unincorporated businesses with an annual turnover above the VAT threshold - currently £85,000 - will need to maintain their VAT records digitally and submit VAT return information to HM Revenue & Customs via MTD-compatible software.
What does this mean for my organisation?
If your company or unincorporated business is VAT registered, then you will be required to submit your VAT returns digitally, using a software package that is compatible with the MTD platform. For some, this may mean a major infrastructure project, to introduce a new software package across their operations and finance teams, and a massive shift in working practices to move from a manual to fully-digital process.
HMRC has though acknowledged this could be a considerably onerous process for businesses, and has given some leeway, until 2020, to ensure that your accounting systems 'talk' to the software you use for submitting your VAT information digitally. The objective here is for businesses to completely remove any manual calculation and processing of VAT data and information, for instance, through spreadsheets or written records, and to subsequently, minimise errors (there will though be some areas of the process that HMRC will allow to continue to be manually calculated but only when used with a form of digital software to send the information to HMRC).
For those companies or unincorporated businesses with a turnover that falls below the VAT threshold, entering into the MTD VAT regime is optional - but you should be aware that if you sign up to the regime - either on the basis of turnover or preference - you will remain in it, even if your turnover falls to a level below the VAT threshold. The only way you can then leave the regime is to de-register your business for VAT (A word of warning - this option should be considered carefully to avoid a deemed output tax charge at the date of deregistration).
Other than turnover, are there any exemptions?
Yes, there are. Some businesses will still be able to file their VAT returns manually and avoid moving across to the digital platform. These exemptions are on the grounds of disability and religious belief or if the business is the subject of an insolvency procedure.
Is there any change to the information I need to submit?
As it stands, HMRC has not indicated there will be any changes to either the information you will be required to submit or to deadlines you need to adhere to for filing your information and paying VAT. The only changes relate to how you record, calculate and submit your VAT return information.
When does this all take effect?
The new MTD VAT regime will be introduced for return periods from or after 1 April 2019.
What should I do now?
We will issue further guidance around the MTD VAT regime in the coming months, but you should also read the information provided on the HMRC's website.
If you need help assessing which is the right MTD VAT-compatible software for the needs of your business, speak to one of our team. We can provide you with more information on the packages available, and can work with you to implement the new software and to put in place the systems and processes you need.