It's alive! MTD for VAT
It's finally here. Making Tax Digital (MTD) for VAT went live at the start of April. Over four out of five businesses were aware of MTD according to research by HMRC in February, but more than half of them were not planning to sign up by 1 April.
Most VAT registered businesses with taxable turnover above the VAT registration threshold of £85,000 must now keep their records digitally because of MTD. They are also required to file their VAT returns using software that can communicate with HMRC through its Application Programming Interface (API).
Digital reporting is only required for complete VAT quarters starting on or after 1 April 2019. The first quarterly VAT returns will become due for businesses that file a return for the quarter ending 30 June 2019, with a deadline of 7 August for businesses to file and pay their VAT.
Fortunately, HMRC has promised a ‘light touch’ approach towards businesses in the initial one-year ‘soft landing’ period which will remain in place at least until April 2020, giving time to adopt the right software. So, for example:
- Businesses will not yet need to set up digital links between software programs – HMRC will accept ‘cut and paste’ instead.
- Penalties will not be issued for late filing but they will be charged for late payment.
- A business that has made a genuine mistake in reporting will not be charged a penalty.
If you have a business that you have not yet registered for MTD, bear in mind that registration takes seven working days to complete. And those who pay VAT by direct debit will need to register at least seven days before submitting a VAT return.
If a business cannot meet the MTD obligations, it may be possible to claim an exemption, for example, if its premises are too remote to obtain internet access, or the owner has a disability that prevents the keeping of digital records.
Please get in touch with us if you have any questions on MTD.