MTD for VAT is fast approaching. This cheatsheet shows some helpful information and resources that should assist a smooth transition.
Who has to register and what records do you need to keep:
From April 2019 VAT registered businesses and organisations with taxable turnover above the VAT threshold of £85,000 will be required to:
- Maintain their accounting records digitally in a software product or spreadsheet. Maintaining paper records will cease to meet the legal requirements in tax legislation.
- Submit their VAT returns to HMRC using a functional compatible software product that can access HMRC’s API (Application Program Interfaces) platform.
The requirements do not apply to VAT registered businesses with taxable turnover below the VAT threshold (eg, those that have registered voluntarily).
What does this mean in practice:
- You must be doing your book keeping in a package. Ideally a cloud package like Xero, Quickbooks Online, or Freeagent. Or on the desktop with MTD enabled software like Sage 50. You must then use this software to submit your returns.
- You must register with HMRC for MTD VAT. This is a new requirement so everyone must do this.
- You must configure your software to use the MTD portal.
What are the key dates?:
We recommend that assuming you have suitable software you take action the day after the submission of your last non MTD VAT return. This will give you 3 months to ensure you have registered with HMRC and switched your software to use the new system.
- March/June/September/December VAT periods
- First mandatory VAT period: 1st April to 30th June 2019
- Deadline for first MTD VAT return: 7th August 2019
- Take action date: 8th May 2019
- April/July/October/January VAT periods
- First mandatory VAT period: 1st May to 31st July 2019
- Deadline for first MTD VAT return: 7th September 2019
- Take action date: 8th June 2019
- May/August/November/February VAT periods
- First mandatory VAT period: 1st June to 31st August 2019
- Deadline for first MTD VAT return: 7th October 2019
- Take action date: 8th July 2019
How to register with HMRC:
HMRC have published a handy video on Youtube to show how to register with HMRC:
HMRC MTD VAT Video
How to switch your software to using MTD:
We will Publish seperate articles on this as the software vendors publish information.
If you need more information please get in touch: Contact Us
Making Tax Digital – The Short Version
Making Tax Digital sounds complex but in the first phase all that it means is that all VAT registered businesses must be submitting VAT returns straight from Software starting in April next year.
Making Tax Digital – The Slightly Longer Version
HMRC’s Making Tax Digital initiative is edging ever closer. So with just six months to go until it comes in here is a review of where we are.
Here is HMRC’s take on it https://www.gov.uk/government/publications/making-tax-digital-how-vat-businesses-and-other-vat-entities-can-get-ready/making-tax-digital-how-vat-businesses-and-other-vat-entities-can-get-ready
Whilst the later phases are still clouded in confusion, the initial phase which covers VAT is now coming and clients will need to submit their VAT returns straight from software. No more totting up invoices on a calculator and then typing the VAT return numbers in to the HMRC VAT portal. It isn’t even clear if a spreadsheet will suffice.
So the bottom line is that in practice all VAT registered businesses should be converting to electronic book keeping by the end of 2018 to be ready for the change. Clients using old unsupported versions of Sage will either have to upgrade to the latest version or even better convert to a cloud accounting package.
Many of our clients wont notice the difference as the are already on Xero, Freeagent or Kashflow either supported by us or with us doing their book keeping. However the few that are still calculating VAT returns manually and then giving us a shoe box at the end of the year will need to convert as soon as possible.
If you are unsure about what you need to do give us a call and we will point you in the right direction.
There is more detail on Making Tax Digital here from the Tax Institute. https://www.tax.org.uk/policy-technical/technical-news/making-tax-digital-vat-main-issues-consideration
The Autumn Budget of 2017 announced that there would be a change to the VAT regime for Contractor Labour starting in October 2019. Similar to the existing CIS scheme this will mean that VAT charged on labour will be paid over by the recipient of the labour service rather than the supplier.
This means yet another scheme for contractors to run alongside CIS when using subcontractors.
The government published a response to their consultation on the 1st of December 2017. In it they confirmed that:
- The scope of the reverse charge will follow the Construction Industry Scheme definition of construction services.
- There will be no threshold applicable to the measure and no exemption for Flat Rate Scheme users (even though they will effectively have to leave the scheme to be able to recover VAT on the costs).
- Sales to the final customer in the chain will not be covered by the reverse charge. Respondents to the initial consultation warned that there may be particular definition issues for joint ventures and special purpose vehicles in the voluntary and public sectors so the definition of ‘the final customer’ will be subject to further consultation in Spring 2018.
If you would like any advice on how this will affect your Contracting business please get in touch!
A change in coming in April 2020 that will affect landlords and second home owners when they come to sell up.
In the past a Capital Gain on the sale of a second property could be reported in a self assessment return. This meant that if a gain was made on the 6th of April that the tax would not be due for nearly 22 months! The gain would be reported at the end of the tax year and the tax wouldn’t be due until January 31st of the following year.
Full details here.
Consultation has just finished on a change that will mean that payment will be due withing 30 days of the disposal. The seller will have to submit a “payment on account” return at the same time.
Obviously this wont affect people selling their main residence as Principle Primary Residence Relief normally applies.
Get in touch if you are thinking of selling a rental or holiday home.
Click here to go to our homepage and fill in the contact form and we will get back to you.
As noted before in summary a change to the Flat Rate VAT scheme was announced in the Autumn Statement. This change comes in to effect on the 1st of April 2017.
This change is intended to target businesses on the Flat Rate Scheme who would only be reclaiming a minimal amount of VAT if they were calculating VAT as normal. Thes businesses will be classed as Limited Cost Traders. A new rate of 16.5% for the flat rate scheme will be introduced which potentially means that people will be better reverting to the standard VAT schemes.
HMRC has defined a Limited Cost Trader as:
A limited cost trader will be defined as one whose VAT inclusive expenditure on goods is either:
- less than 2% of their VAT inclusive turnover in a prescribed accounting period
- greater than 2% of their VAT inclusive turnover but less than £1000 per annum if the prescribed accounting period is one year (if it is not one year, the figure is the relevant proportion of £1000)
Goods, for the purposes of this measure, must be used exclusively for the purpose of the business but exclude the following items:
- capital expenditure
- food or drink for consumption by the flat rate business or its employees
- vehicles, vehicle parts and fuel (except where the business is one that carries out transport services – for example a taxi business – and uses its own or a leased vehicle to carry out those services)
These exclusions are part of the test to prevent traders buying either low value everyday items or one off purchases in order to inflate their costs beyond 2%.
So as you can see this is definitely targeted at contractors and the like who are operating through Limited Companies with low costs.
If you are on the Flat Rate Scheme and would like some help transitioning please do not hesitate to contact us. We will be writing to HMRC on behalf of our clients who are affected and helping them transition if they need to.
HMRC reference is here: https://www.gov.uk/government/publications/tackling-aggressive-abuse-of-the-vat-flat-rate-scheme-technical-note/tackling-aggressive-abuse-of-the-vat-flat-rate-scheme-technical-note