Making VAT Digital
While Making Tax Digital for income tax and corporation tax has been delayed until at least 2020, it has been confirmed by the government that the introduction of digital reporting for VAT will still begin on 1 April 2019. This is included in the second Finance Bill to be published this year, writes Fleur Lewis.
As well as the online filing of VAT returns, as is currently the case, VAT registered businesses will probably have to upload transaction-level data in a specified format. That format is not yet clear.
Detailed information and regulations about how this will work is eagerly awaited from HMRC in order that businesses can start to prepare for the necessary changes they need to make to cope with the digital process.
A House of Commons briefing paper states that ‘as VAT already requires quarterly returns’ no one will have to report more often than they do at the moment. But this ignores such matters as the annual accounting scheme which is available for businesses with a turnover up to £1.35m.
The paper also implies that it’s just a matter of ‘keeping digital records’, so a lot more guidance is required on this.
Can businesses adapt?
Even though most VAT-registered businesses will use some kind of accounting system, the big question is likely to be whether they can adapt what they already have, or if they will need something new. The tax office says that spreadsheets can still be used, but it is as yet not clear how they will link to HMRC’s software.
As digital VAT reporting will coincide with Brexit in March 2019, there may also be changes in the reporting and documentation of transactions with the EU, so advance preparation will be essential.
The latest draft Finance Bill allows the government to make regulations about the administration and enforcement of VAT. It also makes provision for a right of appeal to a tribunal against decisions of HMRC relating to digital VAT records and reporting.
If regulations are made providing for records to be kept or preserved digitally, then VAT-registered persons with turnovers below the registration threshold should not have to comply.
The rules also clarify that those who genuinely cannot use digital tools, due to individual circumstances such as disability, religion or geographical location, will be exempted from these obligations and alternatives will be provided.
Even though Making VAT Digital is a little way off, it does present risks and opportunities for businesses, so it is better to prepare sooner rather than later.
Fleur Lewis is a partner at Bishop Fleming Accountants.
Latest Press Releases
Lithium-ion battery expert Dr John Warner is presenting at the NEXT GENERATION Marine Power & Propul... Read more
Hosting four regional trade shows over seven days and covering nearly 1,400 miles is not for the fei... Read more
SMG are delighted to be launching SMG Meet The Manufacturers 2018. This Trade Only event for the Mar... Read more
February 2018 Fareham UK - Mercator Media Ltd, the international, market-leading B2B marine media bu... Read more