What Making Tax Digital means for businesses from the 1st April 2019, as explained by Stewart Davy.
Commencing on/after 1st April 2019, Making Tax Digital (MTD) for VAT comes into effect for businesses with a VAT-able turnover over the VAT threshold of £85,000 from their first VAT quarter. This is all unless businesses are in one of the exempt categories (such as a VAT group), in which case the date is 1st October. HMRC have now written to businesses who they think will be deferred, and it is this letter that should be retained as evidence of the reason for delay – if any clients think they are deferred but do not have the letter, then the position should be reviewed and HMRC contacted if necessary.
HMRC are not migrating businesses automatically to their new (MTD) digital platform. Businesses must self-assess whether they are caught by the new legislation. If they are, they must ensure that they notify HMRC by the correct period. For clients who we submit VAT returns for, this means Argents notifying HMRC on their behalf and the client confirming this by acknowledging an email from HMRC. We will be looking into the exact process for clients who submit themselves shortly.
Any businesses to which the new rules apply must comply with the following;
- Keep digital records, including mandatory prescribed data
- Submit their VAT return to HMRC via an API enabled method (this does not mean just via accounting software, as that has been possible for some time and is not what MTD is trying to change)
The data that is submitted is no different to what HMRC receive now – 9 boxes of numbers. Therefore, there is no current way for HMRC to know whether a business is keeping the correct records from the details within the submission. For some clients with specific issues we have already looked at how and what records are being kept and how these might need to change to comply with MTD. However, for most, this is likely to be reviewed as and when we see clients’ bookkeeping data (e.g. when accounts are prepared), and we will advise accordingly at that time if any changes should be made.
All employees at Argents who might be involved with client data on a detailed level (such as bookkeepers and accounts preparers) are receiving guidance on the digital record requirements and will be able to assist clients with any queries.
The more pressing issue will be that of signing up for the new MTD service, and making the first submission. HMRC are currently running a pilot scheme that will allow submission to be made in advance of it becoming compulsory. Argents have already made an MTD submission under this scheme and plan to do a few more through various software packages over the next month (e.g. Xero, Quickbooks).
It is important to realise that once you have signed up for MTD there is no going back to submitting via non-API systems, so our advice to clients is that they should not sign up until they have to comply.
Our preferred method for clients to make submissions is through API enabled accounting software. This would be ideally cloud-based, such as Xero and Quickbooks, so that we can benefit from the other aspects of that type of software (for the latter we have several “cheap” licences to use up if you are interested). For some clients, however, spreadsheets may remain as their primary records. If this is the case we now have a piece of “bridging software” within our practice management Iris software that enables us to link up the data in a spreadsheet, so that it can be submitted to HMRC.
If they have not already, the directors and managers of Argents will be in contact with clients about MTD. If you have any concerns in the meantime, please call or send us an email and we will be happy to help.