As a business owner, I'm sure (or I hope) you're aware that HMRC are introducing new systems to replace the existing VAT and Income Tax returns. The aim is to "Make Tax Digital" (MTD), starting with VAT in 2019, and to have the majority of businesses using cloud accounting software that will enable them to update their tax accounts directly from the software.
Since being introduced in 2017, HMRC have released a number of updates along the way which you may not be aware of. First of all, it’s good news, they’ve assured us of a soft landing (phew). HMRC has confirmed that digital reporting requirements will be relaxed during the first year of Making Tax Digital for VAT-registered businesses.
Whilst businesses across the country adjust to the new software, the HMRC VAT notice, published in July 2018, confirmed the relaxed reporting requirements but made no mention of how the soft landing on penalties will apply.
From 1 April 2019, VAT registered businesses with annual taxable turnover of more than £85,000 will be required to maintain digital records for VAT and submit VAT returns using MTD-compatible software. Under the requirements of MTD, any transfer of data must be carried out using the software which is capable of maintaining the records stated in the regulations, preparing VAT Returns using the information in those digital records and communicating with HMRC via the Application Programming Interface platform.
However, for VAT periods starting in the 2019/20 tax year, businesses will not need to have digital links for all software and will be able to manually transfer or cut and paste their records instead. Though, this does not include the submission of the VAT return itself, which must be shared with the Revenue using an application programming interface (API).
Now, you’re probably trying to wrap your head around all of the HMRC jargon, but don’t panic, that’s what we’re here for. We have partnerships across the country with some of the leading cloud accounting software providers so our specialised team can liaise and assist you in the transition to make sure that you and your business are ready for the big launch in April 2019.
With more updates from HMRC inevitably due throughout the upcoming months, we’ll be here to guide you through.
