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Tax updates

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Making Tax Digital – Implications for VAT registered businesses

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From 1 April 2019, businesses which are registered for VAT and have taxable turnover above the VAT registration threshold (currently £85,000) would be required to prepare and submit VAT returns using a HMRC approved softwares, under the Making Tax Digital (“MTD”) rules. This requirement would also apply to VAT registered businesses who subsequently see a fall in their taxable turnover below the VAT registration threshold after 1 April 2019.

However, businesses with a taxable turnover that has never exceeded the VAT registration threshold and certain other businesses would be exempt from the MTD rules, although they might voluntarily prepare and submit VAT returns under the MTD rules.

Along with preparing and submitting VAT returns via functional compatible softwares, businesses would also be required to maintain records via the softwares.

The functional compatible softwares in question would need to be able to:

  • Record and preserve digital records;

  • Provide to HMRC information and returns from data held in those digital records; and

  • Receive information from HMRC.

Businesses that use spreadsheets to prepare VAT returns would need to ensure that a digital link is created to meet the requires of the MTD.

HMRC has also outlined that there will be a soft landing period to enable businesses to amend the VAT compliance processes to incorporate the required digital link in their VAT compliance processes.

How we can help

We appreciate that a lot of small and medium sized businesses prepare VAT returns on spreadsheets and that their current processes do not meet the requirements of the MTD. Changing or amending their current processes might be costly. For example, purchasing a software to prepare VAT returns might be expensive.

Moreover, preparing VAT returns that involve partial exemption and capital goods scheme calculation might not be suitably done through a software. Often, these calculations (and others) must be done separately on a spreadsheet.

We could help by:

1.     Reviewing your VAT return workings and amend as necessary or prepare a new template to provide the pertinent digital link.

2.     Submitting the VAT returns via our HMRC approved software.

3.     Preparing your VAT return workings and submit via our HMRC approved software.

4.     Reviewing your current record keeping, advise on changes that need to be made, and assist in putting things in place to ensure that the requirements of the digital record keeping under the MTD are met.

Mohamad AuhammudAlexandr Walker