HMRC has announced that Making Tax Digital (MTD) for individuals will be delayed while the UK prepares to leave the EU.
MTD for individuals was due to start in 2020, but the government has revealed that the plans are on hold while HMRC focuses on Brexit. Progress on Simple Assessment and dynamic tax codes will also be delayed.
Nevertheless, MTD for VAT is still due to start in April 2019, as previously planned. From that time, businesses with a turnover above the VAT threshold (currently £85,000) will be required to keep digital records for VAT purposes and submit VAT returns using MTD compatible software. Companies, unincorporated businesses, charities and LLP's will all be required to comply.
Unlike with payroll, HMRC are not planning to provide free software tools to help businesses comply with MTD for VAT. Therefore affected businesses will need to source appropriate commercial software which will enable them to keep and preserve records in digital form; create VAT returns from those records; provide HMRC with VAT data when required; and receive information from HMRC via the Application Programme Interface.
It is expected that MTD for VAT will cater for users of the Flat Rate Scheme, Annual Accounting Scheme and the various Retail Schemes; monthly returns will also be permitted.
HMRC's online portal is expected to remain available to all other businesses that complete a VAT return but have turnover beneath the VAT threshold.
Owners of VAT registered businesses who will be required to comply with the new rules now have less than one year to ensure that they have the appropriate software and procedures in place.
If you are still operating with manual books or basic spreadsheets right now, it's probably a good idea to decide what steps you will take in the next few months to ensure you will be able to comply with the new rules. Contact us for assistance.
Struggling to visualise what you need to do? Check out Sage's MTD for VAT infographic here.