Making Tax Digital for VAT – Sign up Process

To submit VAT returns under Making Tax Digital (MTD), there are steps to follow to make sure that you are signed up for MTD.

If you are unsure whether MTD applies to you, there is more information here.

Where We Prepare & Submit VAT Returns For clients:

Where we currently prepare VAT returns for you and submit them to HMRC, we have set up the necessary online account to submit VAT returns under MTD. We will need to register you/your business for MTD online, which we will do after 7 May, which is the final deadline for March VAT returns under the old regime.

You Prepare & Submit Your Own VAT Returns:

You will need to register to file VAT returns under MTD online. To do this, you will need to go to the link below and fill out the relevant information.

https://www.tax.service.gov.uk/vat-through-software/sign-up/have-software

HMRC will send you a confirmation email within 72 hours of signing up.

Do not submit a VAT Return until you receive the confirmation email. You must send your VAT Return using MTD compatible software.

You can still view your next VAT Return deadline in your Business Tax Account as you normally would.

You can contact HMRC at the VAT helpline on 0300 200 3700 if you have any questions on registering for MTD.

 

Making Tax Digital – Where is the Communication?

With Making Tax Digital for VAT coming for many VAT registered businesses from April 2019, many people are asking the question, what is it and why haven’t I been told about it?!

For many businesses that are VAT registered and over the VAT threshold, they will go in to Making Tax Digital from April 2019. There are some exceptions set out by HMRC to this deadline, which will be delayed until October 2019 and includes;

  • Trusts
  • Unincorporated charities
  • VAT divisions & VAT groups
  • Some public sector entities
  • Public corporations
  • Traders based overseas
  • VAT traders who use annual accounting

For many other businesses that are both VAT registered and over the VAT threshold, they will go in from April 2019. Which begs the questions, why don’t many people know about it? We have been writing to clients to let them know about the changes since April and posting updates online here;

https://wp.me/p7ElJK-lg

https://wp.me/p7ElJK-lh

Whilst HMRC have been Tweeting about Making Tax Digital, there seems to have been little time spent on informing those businesses that are affected by the changes. We expect that HMRC will be writing to businesses affected by the changes at some point soon! The ICAEW found in research carried out in July 2018 that just over half (51%) of all UK VAT registered businesses had heard of MTD for VAT which means that around 49% had not heard about Making Tax Digital for VAT, which is very worrying.

When Paul Lewis from Money Box tweeted about the Making Tax Digital changes the responses included comments such as “I thought this had been delayed” and “I think the changes will be scrapped.”

Whilst we do not agree with the changes being compulsory for all businesses, as we feel that some businesses will not benefit as much from using software, whether we like it or not, businesses have to work to the deadlines set out by HMRC. If you go in to Making Tax Digital from April 2019, there will be no option to file a VAT return online to HMRC, it will need to be done through compatible software. The issue is navigating through the software available if you have never used any.

Of the software available, we have been recommending software to clients that suits their needs. For some businesses that may be Xero, Sage, or QuickBooks, and for others it may be bridging software that takes figures from spreadsheets and imports the figures in to the bridging software (although this is not as straight forward as it sounds, as template software is used which must be filled out in a set way).

There are some benefits for many businesses in using software. It can help to keep the record keeping more up to date, to enable you to review figures in the year such as;

  • Profit and Loss – this can help to plan and budget and to set some money aside for tax liabilities.
  • Management Accounts – to enable you to review figures for specific projects, jobs, periods, or services in the year to see how much profit is being made and a breakdown of the cost involved.

There are some other benefits with using software which will vary from business to business. Our best advice to any businesses that will go in to Making Tax Digital from April 2019 is to look at all available software. Try the free trials on software to see how the software works. Start preparing now for the change, so that you are prepared and ready for it when it comes in.

For any businesses that do not know what the next step to take is, we can discuss any software options with you. Whilst we are against the changes, we feel that is important to make the most of any benefit that the software offers to you and we can help to explain these benefits to you.

Please feel free to get in touch with us if you have any questions on Making Tax Digital.

 

 

 

 

Making tax digital – the latest

We have previously written about the government proposals, known as Making Tax Digital for Business (MTD).

Unincorporated businesses, including landlords, were expected to be the first to see significant changes in the recording and submission of business transactions but the government has announced a delay to the implementation of the new rules.

The new timetable is being introduced following concerns raised by the Treasury Select Committee, businesses and professional bodies about the implementation of the new rules and to hopefully ensure a smooth transition to a digital tax system.

The government have confirmed that under the new timetable:

  • Businesses will not now be mandated to use the Making Tax Digital for Business system until April 2019 and then only to meet their VAT obligations. This will apply to businesses who have a turnover above the VAT threshold.
  • These businesses will be able to provide quarterly updates for other taxes too, but there will be no mandatory requirement to do so. Similarly, businesses that are not VAT registered and those below the VAT threshold who have voluntary registered for VAT can opt to use the system.
  • The government will not widen the scope of Making Tax Digital for Business beyond VAT before the system has been shown to work well, and not before April 2020 at the earliest. This will ensure that there is time to test the system fully and for digital record keeping to become more widespread.

 

VAT quarterly returns

The government has stated – ‘as VAT already requires quarterly returns, no businesses will need to provide information to HMRC more regularly during this initial phase than they do now’. What this statement does not highlight is the fact that currently many businesses do not submit VAT returns direct from software but use spreadsheets. HMRC has previously stated that spreadsheets will need to meet all the necessary requirements of MTD (ie not just keep a record of each transaction but also provide quarterly summary information).

The government has stated:

HMRC will start to pilot Making Tax Digital for VAT by the end of this year, starting with small-scale, private testing, followed by a wider, live pilot starting in Spring 2018. This will allow for well over a year of testing before any businesses are mandated to use the system.

Other parts of the Making Tax Digital (MTD) project

Other parts of the MTD project will continue. In particular the objective of bringing together each individual taxpayer’s information in one online place – a Personal Tax Account – will continue to be progressed. For example, banks and building societies will, from April 2018, be required to report information to HMRC earlier and more frequently, than currently. This information will then feed into the Personal Tax Accounts and will be used by HMRC to estimate tax liabilities.

 

We have created an FAQ page to try and cover some of the questions you may have at the link here.

 

 

 

 

MTD – FAQ’s

We have answered some of the questions you will be likely to have on MTD below. If you would like to contact us to ask us anything, please feel free to. 

VAT Threshold – The VAT threshold is currently £85,000. It is likely to remain the same at April 2019. More info here

 

1)

Q) I currently use spreadsheets to prepare my VAT returns. What should I do?

A) You will need to consider which software you are going to use to prepare your VAT returns and submit them to HMRC from April 2019. We can assist with getting your business set up on software that will comply with the rules from April 2019. FAQ 8 has more information.

2)

Q) I am VAT registered but under the VAT threshold. Will I need to file my VAT returns through compatible software from April 2019 or will I still be able to do this online?

A) As we understand, for businesses under the VAT threshold at April 2019, it will not be compulsory from April 2019, to file VAT returns through software to HMRC and we believe it will still be possible to file the return figures online to HMRC, as has been done previously, until April 2020.

3)

Q) What happens if I am over the threshold at April 2019, and therefore go in to making tax digital, but subsequently, my turnover goes under the VAT threshold?

A) If you begin reporting your VAT returns through software due to being over the VAT threshold at April 2019, and your turnover then drops below the threshold, if you remain VAT registered, you will need to continue to submit your VAT returns through software. If you deregister your business for VAT, due to the turnover dropping below the threshold, then you will not be required to report VAT return figures to HMRC through software, until the next date for all business (2020 or later if delayed) comes in to effect.

4)

Q) Are there any penalties or new penalties for submission of VAT returns April 2019?

A) As far as we know, the penalty regime for late submission or payment of VAT from April 2019 to April 2020, will remain the same is it is currently.

5)

 Q) When will I first have to submit a VAT return through software?

A) If your business is currently over the VAT threshold and remains over the VAT threshold at April 2019, then the first VAT return that commences on or after 1 April 2019, will need to be submitted to HMRC through software.

6)

Q) My VAT quarters are April, July, October, and January. When will the first VAT return need to be submitted through software?

A) The first return that will need to be submitted through software, will be the July 2019 return.

7)

Q) What is compatible software?

A) We understand that HMRC are currently testing with a number of software providers and are planning to produce a list of software providers that they know will be able to comply with the new legislation. We are expecting that to be released in summer. We would also expect that the larger software providers, such as QuickBooks, Xero, Sage, and Freeagent will all be sufficient to comply with the legislation, because they will need to be!

8)

 Q) I use spreadsheets currently to prepare VAT returns, what can I do?

A) There are a number of software platforms that may be able to produce the necessary information and reports needed by HMRC from April 2019 from spreadsheets. This will mean using specified spreadsheet templates, so that bridging software can be used to take the transactions from the software to submit the information to HMRC. We are unsure currently exactly how this will work and how easy to use the template software will be. Our advice, would be to start looking at other providers, such as QuickBooks and Xero, and to look at the free trials. We believe, it may be easier and more time efficient to do this rather than continuing to use spreadsheets.

9)

 Q) Does this mean I will need to start attaching all my invoices to the software transactions and HMRC will be able to see them all?

A) From the information that we have, we believe that HMRC will only be able to see the summary VAT return figures from the submissions (the VAT due, sales VAT, purchase VAT, and net figures). There will not be a requirement from April 2019, to start attaching invoices and receipts to all the transactions in the software.

10)

 Q) Can I just enter the total figures from my spreadsheet in to the software and then submit the VAT return?

A) Although HMRC will only see the summary figures from each VAT return from April 2019, there is a requirement to record all of the necessary transactions in the period to show the date of the invoice, date of the supply, the net amount, the VAT charged and rate of VAT, and the gross amount for all the transactions in the quarter. There will be some exceptions for transactions such as, including the fuel scale charge for private use of a car, or applying the partial exemption VAT rules.

11)

 Q) I use Sage desktop to do my bookkeeping currently. Will I be able to use it to submit my VAT returns to HMRC or will I have to change software provider?

A) If you use Sage desktop, based on the information we have, you will be able to submit VAT returns from April 2019 through the software to HMRC. You will however need to make sure that you are using V24.1 of the software, as older versions will not comply with Making Tax Digital. Some Sage desktop users will be able to update for free, but if you are unsure, you can call Sage and give them your account number to check this.

Making Tax Digital – TIMETABLE UPDATE

An announcement has been made today on a new timetable for Making Tax Digital. The announcement can be read here.

The new timetable will mean that;

  • From April 2019, businesses with turnover above the VAT threshold (which is currently £85,000 a year), will start reporting quarterly through cloud based software to HMRC.
  • All over businesses will not need to start reporting quarterly through cloud based software until “at least 2020.”

This is at least some good news, as it will give businesses more time to prepare for the changes. When the election was called, large amounts of the finance bill were removed, which left some uncertainly as to what would happen with Making Tax Digital. The changes to the timetable will be legislated for as part of the Finance Bill 2017.

 

 

 

 

Making Tax Digital – Election Update

In the last budget, the timetable was announced for introducing quarterly reporting (Making Tax Digital). There are still a number of unanswered questions which HMRC are consulting on. The timetable from the budget will mean that;

  • From April 2018 any sole traders, partnership businesses, or landlords with an annual turnover above the VAT threshold (currently £85k), will need to start reporting quarterly to HMRC.
  • From April 2019 any sole traders, partnership businesses, or landlords with an annual turnover below the VAT threshold (currently £85k), will need to start reporting quarterly to HMRC.
  • From April 2020 for any limited companies.

 

We have been responding to the HMRC consultations about our concerns to the changes in reporting to HMRC, and the speed at which the changes are planned to be introduced. We are particularly concerned about the lack of clarity that HMRC has given on certain issues.

The government has released some guidance on the legislation that says;

“The government is keen to ensure that stakeholders have an opportunity to comment on the draft regulations. Therefore, the government will also publish a full version of the draft regulations in the summer of 2017 for technical consultation.”

Now that an election has been called for 8 June, it may lead to a delay in the final legislation that will set out the details for making tax digital, which were intially expected in summer. It may even lead to a new government or a new chancellor.

Alternatively, Treasury Committee Chair Andrew Tyrie said that “when an election is called, large sections of the budget are excised in hurried negotiations between the [government and opposition] front benches and a concertinaed finance bill is pushed through on an agreed basis, in order to ensure that the public finances are not put at risk.”

We will be advising clients on how to prepare for quarterly reporting and updating them on any information that is necessary in helping to support them. We have been working with software providers to get the best solutions for clients and offering discounts.

 

 

 

 

 

 

Making Tax Digital – Timetable Update

In the last budget there was a further announcement for the timetable on which businesses will be expected to start reporting quarterly through online software to HMRC.

C6Zn9_jWAAAK2Hp.jpg

We can offer advice on the most suitable bookkeeping packages that can be used to comply with the new reporting requirements. We can also offer discounts on certain bookkeeping packages, where a number of businesses sign up at the same time.

 

Making tax digital consultations – update

HMRC are now considering responses to the Making Tax Digital consultations. From reviewing some of the responses that have been posted on social media, it is clear that there are concerns from professional bodies and accountants about the timing and scope of the changes.

The ACCA response highlighted issues surrounding the cash basis and suggested that it does not give an accurate picture of how businesses are performing. This reflects potential issues around applications for funding, such as for mortgages or loans. Lenders usually request information from accountants which they will use to consider applications.

The Autumn Statement did not give any indication of the potential areas of concern that HMRC will seek to address from the consultation. All we know currently is that HMRC are going to be releasing more information in January, once they have considered the responses they received from the consultation.

We are particularly concerned about small businesses and how the changes will affect them. There have been a number of changes recently including auto enrolment pensions which has affected small employers.

We have been working to try to get the best deals on software packages for our clients to help them transition to online bookkeeping packages.

We are happy to answer any questions about the changes and how it will affect your business.

 

 

 

 

Quarterly reporting update – Consultation released by HMRC

Last week HMRC released consultation documents which had more detail on the move to quarterly reporting. We have highlighted some of the main areas of consideration from the consultation. The consultation discusses sole traders and partnerships and how the move to quarterly reporting will affect them.

Who will have to report quarterly and what will be reported to HMRC?

  • Exemptions from quarterly reporting for unincorporated businesses with annual turnover below £10,000. We believe this will be total annual turnover, not turnover per business.
  • Four submissions will be made annually to HMRC for those who need to report quarterly. The fourth submission each year will include any necessary adjustments to figures such as capital expenditure/capital allowances and is described as an “end of year activity” submission in the consultation. The three submissions prior to the end of year activity submission will include sales / expense invoices and bank receipts and payments.
  • Those who genuinely cannot use digital tools will not be forced to do so under Making Tax Digital and will be exempted from the new obligations. HMRC are considering who will be exempted and will release more detail.
  • A consideration to defer the introduction of these new obligations by one year (from 2018 to 2019) for a limited group of businesses and landlords with annual turnover above £10,000 but below a defined upper income threshold. The upper income threshold is to be decided upon.

Changes in late filling penalties and tax payment due dates;

  • Late penalties will change and a new regime will be introduced. The consultation proposes a graduated model with each non-deliberate failure to submit information on time attracting penalty points. Only once the points reach a set level would a penalty be charged. A stronger sanction is outlined for those who are deliberately non-compliant.
  • Voluntary payments are discussed in the consultation and how HMRC will allocate payments. Quarterly reporting can be used to estimate the tax due for the quarter to pay the tax to HMRC. Seasonal fluctuations with businesses and other adjustments such as stock levels, work in progress, capital expenditure, bad debts and other yearly adjustments will not be included in every quarterly report, they will be included once a year in the end of year activity submissions.

 

 Software options;

  • HMRC will not be providing free software for businesses to use to report quarterly.
  • Some software providers will provide free software for very simple submissions but most businesses will have to pick software to use so that they can report quarterly to HMRC.

We have been working with Quickbooks to provide a cost effective solution to clients to enable them to report quarterly to HMRC. Please get in touch if you want to find out more about the Quickbooks online packages.

HMRC “making tax digital”- Update delayed

HMRC were due to release more information in July, after the referendum, to give more detail on the move to quarterly reporting.

The initial document released by HMRC on quarterly reporting stated;

“By 2020, most businesses, self-employed people and landlords will be required to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account. These changes will be introduced for some businesses from April 2018, and will be phased-in by 2020, giving businesses time to adapt.”

Smaller businesses are being required to move to “Making Tax Digital” before larger businesses. We believe that the first quarterly updates will be required by non-VAT registered self-employed businesses and landlords with an accounting period starting after April 2018. All VAT-registered businesses will be brought in from April 2019 and companies from April 2020.

There are many unanswered questions and we were hoping that the consultation due out in July would shed some light on some of the issues that have been raised. So far, the understanding is that in effect, a huge number of people that currently submit tax returns yearly and use spreadsheets, will have to start using software and submitting information quarterly to HMRC.

HMRC said that “following the early change of prime minister, HMRC’s executive leadership will need to be available to ministers at all times during the remainder of the week. “Unfortunately, this means that we will have to postpone the HMRC Stakeholder Conference on Thursday 14 July. We’re sorry for the short notice and inconvenience, and we will be in touch with a new date as soon as we can.”

“The political landscape has rapidly changed this week. We currently intend to publish the MTD consultation documents in the summer but understandably it won’t be this week.”

There has also been suggestions that the dates tax payments are due will change. This question has been put to the treasury to which the response was “no decision has yet been made about changing payment dates.”

So for the moment, we will have to wait for the update to see if there is more information from HMRC on quarterly reporting. We have been in discussion with Quickbooks to see what options are available for clients who currently use spreadsheets, to make sure that we can get the most cost effective solution.

Please let us know if you have any questions.