Making Tax Digital for VAT is rapidly approaching, so it is imperative that affected businesses are well prepared.
From April 1st 2019, all VAT registered businesses and organisations with taxable turnover above the VAT threshold (£85,000) are required to maintain their accounting records digitally and submit their VAT returns to HMRC using compatible software that can access HMRC’s platform.
However, qualifying businesses needn’t wait until then.
To facilitate a smooth cross over to a fully digitised system, HMRC have devised a “Making Tax Digital for VAT” pilot scheme which businesses can test ahead of the Spring deadline, making sure you’re ready when the changes come in.
The pilot is open to sole traders, companies and partnerships whose tax affairs are up to date and straight forward. HMRC also announced in December that partnerships and organisations using the VAT flat rate scheme may now enter the pilot scheme too.
It is important to note that some businesses are excluded from taking part in the pilot for the time being, including trusts, charities and those with non-standard accounting periods. To clarify, the pilot is not yet open to any business that:
- Trades with, or has traded with the EU
- Is part of a VAT group or VAT division
- Is based overseas
- Is a trust
- Is a not for profit organisation not set up as a company
- Submits monthly or annual returns
- Makes VAT payments on account
- Is a business that is newly registered for VAT and has not previously used its online account to submit a VAT return
There are, however, plans to extend the pilot to most other businesses over the next few months. HMRC has also announced it will grant a small group of customers with more complex requirements a further 6 months to prepare.
HMRC is transforming the tax administration so that it’s more effective, more efficient and easier for taxpayers. If you are a qualifying business, we thoroughly recommend you consider signing up to HMRC’s VAT pilot scheme.
If you have any queries regarding Making Tax Digital for VAT, and how the changes may affect you, please get in touch with your usual Smith Cooper contact, or click here.