Digital VAT returns start on 1 April. Are you ready?
Are you ready for the Making Tax Digital VAT rollout? It starts with the new financial year on 1 April.
David Redfern, Managing Director of DSR Tax Claims, has issued guidance in order to assist firms to prepare for the start of the mandatory requirement that VAT records be digitised for all businesses with a taxable turnover of £85,000 - the current threshold for VAT registration - or more. Businesses below the threshold that are currently registered for VAT can choose to opt into Making Tax Digital (MTD) for VAT but are not legally obliged to do so.
HMRC has issued its VAT Notice 700/22, to provide businesses with further information regarding the MTD for VAT requirements, which will make digital VAT returns mandatory for VAT periods beginning on or after 1 April. David Redfern has issued his guidance for businesses unsure of how this digital rollout will affect them.
He said: "All businesses with a taxable turnover greater than the VAT threshold will have to keep their VAT records digitally and send their VAT returns to HMRC using MTD-compatible software for VAT periods which begin on or after 1 April 2019. So if your VAT accounting period runs from 1 March 2019 to 31 May 2019, your next VAT period beginning 1 June will need to be MTD-compatible."
David warns businesses: "The future may be paperless but MTD won't initially remove the requirement to keep any physical business records. Depending on the software and data recorded, it may still be necessary to retain a paper copy of the business record. For example, where only certain data is recorded from an invoice, you would still be required to retain a copy of that invoice for your business records because the software wouldn't be recording all the data from the invoice."
Where an image of the entire invoice is scanned, businesses may not need a physical copy, although some records are required by law to be retained in their original form. And David cautions businesses to consider their data backup arrangements carefully in order to ensure financial data are not irretrievably lost if a computer fails.
For businesses concerned about their digital preparations for VAT MTD, David had some comfort, noting that: "HMRC has designated a certain ‘soft landing' period to allow businesses to get all required digital links in place. This means that for the first 12 months of ‘mandation', businesses won't be required to have all their digital links fully operational, so if your first affected VAT period begins on 1 April 2019, you will have until your first VAT return period on 1 April 2020 to ensure that all your links communicate automatically.
"This doesn't mean that you don't have to submit a digital VAT return, though. It just means that you have a 12 month soft landing period to ensure that all of your digital links communicate with each other to eliminate any manual intervention."
Despite the soft landing period, David urges businesses not to be complacent. "The soft landing period doesn't mean that you can relax about MTD. You might need that period to ensure all your software functions together."
DSR Tax Claims Ltd is a firm of tax rebate specialists. Their specialist team can help employed and self-employed subcontractors to make sure their claims are handled in an accurate and efficient manner.