MTD for VAT takes effect for over one million businesses

On 1 April, the government’s Making Tax Digital for VAT (MTD for VAT) initiative came into effect.

Businesses which have a taxable turnover above the VAT registration threshold (currently £85,000) are now required to comply with MTD for VAT. As part of the initiative, firms must keep some records digitally, using ‘functional compatible software’. This means a ‘software program or set of compatible software programs which can connect to HMRC systems via an Application Programming Interface (API)’.

Commenting on the scheme, Mel Stride, Financial Secretary to the Treasury, said: ‘Delivering MTD for VAT is the first step toward our ambition to create one of the most digitally advanced tax authorities in the world.

‘The rules . . . will give businesses more control over their finances, allowing them to spend their time focusing on innovation, growth and the creation of jobs.’

However, the Association of Taxation Technicians (ATT) and the Chartered Institute of Taxation (CIOT) have warned firms ‘not to sign up too early’ for MTD for VAT. They state that, although 1 April 2019 is the start date for maintaining digital accounting records, it is not the deadline to sign up for MTD for VAT.

Adrian Rudd, Chair of the joint ATT/CIOT Digitalisation and Agent Strategy Working Group, said: ‘More than 70,000 businesses are now signed up to MTD, the majority of which have done this themselves. We hope they have not jumped the gun, having misunderstood the requirements.’

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HMRC warns businesses MTD registration ‘takes seven days’

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With Making Tax Digital for VAT (MTD for VAT) set to take effect from 1 April, HMRC has warned UK businesses that the registration procedure will take up to seven days to complete.

MTD for VAT will apply for businesses which have a taxable turnover above the VAT registration threshold (currently £85,000). As part of the initiative, businesses must keep some records digitally, using ‘functional compatible software’. This means a ‘software program or set of compatible software programs which can connect to HMRC systems via an Application Programming Interface (API)’.

In recently published guidance, HMRC stated that businesses that pay VAT by Direct Debit cannot sign up to the MTD for VAT scheme in the seven working days leading up to, or the five working days after, sending a VAT return.

In order to sign up to MTD for VAT, businesses will require their Government Gateway user ID and password, alongside their VAT number.

Once firms have registered, HMRC will send a confirmation email within 72 hours. Businesses are urged not to submit their VAT return until they receive the confirmation email.

The government has provided guidance on the matter – this can be found here.

Putting MTD software into place ‘will cost firms an average of £564’, FSB finds

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Research published by the Federation of Small Businesses (FSB) has found that putting Making Tax Digital (MTD) software into place ‘could cost UK small firms an average of £564’.

MTD for VAT is set to come into effect from 1 April 2019 for businesses which have a taxable turnover above the VAT registration threshold (currently £85,000). As part of the initiative, businesses must keep some records digitally, using ‘functional compatible software’. This means a ‘software program or set of compatible software programs which can connect to HMRC systems via an Application Programming Interface (API)’.

The FSB revealed that 23% of small businesses have received quotes for MTD-compliant software, but are yet to make a purchase.

According to the research, bigger businesses must pay higher prices for MTD-compliant software. Firms with a turnover between £500,001 and £1 million could be landed with an average bill of £872 for MTD software. Businesses with a turnover of more than £1 million could be given a bill of £1,019.

‘We’re only three weeks away from the roll-out of MTD, and small businesses are clearly not prepared for it,’ said Mike Cherry, National Chairman of the FSB.

‘That being the case, the Chancellor must double down on his commitment to light-touch enforcement when he delivers the Spring Statement on Wednesday.

‘At a time when small business confidence is in the doldrums – and wages, auto-enrolment contributions and business rates are rising – more costs and admin burdens are the last thing they need.’

HMRC publishes guidance on accounting for VAT in event of a ‘no deal’ Brexit

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HMRC has published guidance on how businesses should account for import VAT in the event that the UK leaves the EU without a Brexit deal.

According to the guidance, if the UK leaves the EU without a deal, VAT-registered businesses may choose to account for import VAT on their VAT return, as opposed to paying when the goods arrive at the UK border. Goods from both EU and non-EU countries will be covered by the rules.

If businesses are not registered for VAT in the UK, they will not be able to record the import VAT on their VAT return, and will be required to pay VAT up front at the time of import.

Any goods already in transit from the EU must continue to be treated as acquisitions, and VAT must be accounted for on the return for the period in which the acquisition occurred.

From 29 March 2019, all businesses importing goods into the UK will need a UK Economic Operator Registration and Identification (EORI) number. HMRC intends to write to all VAT-registered importers and exporters in order to explain the steps they will be required to take in the event of a no deal Brexit scenario.

Jim Harra, Deputy Chief Executive of HMRC, stated that HMRC ‘recognises the challenges businesses face’ in getting to grips with the new requirements by 29 March 2019. Mr Harra said that the Revenue is ‘committed to supporting’ firms.

Survey suggests eight in ten businesses ‘aware of MTD for VAT’.

A survey carried out by HMRC has revealed that 81% of VAT-mandated businesses are ‘aware of Making Tax Digital for VAT (MTD for VAT)’, either by name or by concept.

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MTD for VAT is set to come into effect from 1 April 2019 for businesses which have a taxable turnover above the VAT registration threshold (currently £85,000). As part of the initiative, businesses must keep some records digitally, and must submit their VAT returns via an Application Programming Interface (API).

HMRC polled 500 businesses, and found that 43% of firms had heard about MTD through their accountant. A further 13% had heard about the initiative via an email from HMRC; 11% read about it on HMRC’s website; and 9% heard via a letter sent to them by HMRC.

However, only 45% of businesses stated that they plan to sign up to MTD for VAT before its introduction in April. One in five firms ‘don’t have a clear idea’ of when they plan to sign up, and 4% said that they require additional information before they decide.

Commenting on the MTD for VAT initiative, Mel Stride, Financial Secretary to the Treasury, said: ‘HMRC has made good progress in preparing for MTD. The pilots have progressed well, and the full functionality of MTD has been tested with a wide range of different businesses, including some below the VAT threshold, which have chosen to take part voluntarily.

‘HMRC is ready, the software market is ready, and hundreds more businesses are getting ready every day by joining the pilot.’

HMRC confirms Brexit will not affect roll-out of MTD for VAT

HMRC has confirmed that Brexit will not affect the introduction of Making Tax Digital for VAT (MTD for VAT).

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MTD for VAT is set to come into effect from 1 April 2019 for businesses which have a taxable turnover above the current VAT registration threshold of £85,000. As part of the initiative, firms must keep some records digitally, and must submit their VAT returns via an Application Programming Interface (API).

Experts previously suggested that HMRC would have to delay the introduction of MTD for VAT if the UK was to leave the EU without a Brexit deal. However, in a recent letter, Jim Harra, Deputy Chief Executive of HMRC, wrote: ‘Our system is already live and by the end of February we’ll have written to every affected business, encouraging them to join the thousands of others who have registered.’

In 2018, the British Chambers of Commerce (BCC) called for HMRC to postpone the introduction of MTD for VAT until April 2020, citing a ‘lack of awareness’ of the scheme and its requirements amongst UK firms.

The BCC stated that a delay of a year would ‘provide extra headroom’ to HMRC, allowing it to support businesses with MTD-related issues.

HMRC extends MTD for VAT pilot scheme to all eligible firms

HMRC has extended its Making Tax Digital for VAT (MTD for VAT) pilot scheme to all eligible businesses.

MTD for VAT is set to come into effect from 1 April 2019 for businesses which have a taxable turnover above the current VAT registration threshold of £85,000. As part of the initiative, firms must keep some records digitally, and must submit their VAT returns via an Application Programming Interface (API).

Any business utilising MTD for VAT whose turnover subsequently falls below the VAT threshold must stay in the regime, unless they deregister for VAT. Additionally, any firm exceeding the registration threshold after 1 April 2019 must comply with MTD for VAT, and is given 30 days to ensure that the appropriate digital software is in place.

As part of the pilot scheme, all eligible businesses are permitted to test out HMRC’s MTD for VAT system. The pilot scheme was first launched in April 2018, and was subsequently opened to half a million UK firms in October 2018.

Commenting on the pilot scheme, Clare Sheehan, Deputy Director for MTD for Business, said: ‘The MTD pilot is now available to all businesses who will need to use the service from April. This marks a significant milestone towards our delivery of a modern tax administration.

‘We encourage all eligible businesses to join and try out the service before they are mandated to use it.’