The Making Tax Digital (MTD) initiative is nearly here, and you need to know how this new legislation will affect you.

MTD is a key part of HMRC’s plan to help business owners to submit accurate calculations and keep on top of their taxes. It is HMRC’s goal to become the most digitally advanced tax administration in the world.

From 1st April 2019 businesses with a taxable turnover over £85,000 will need to submit their VAT returns under new the guidelines. But what does that really mean for UK businesses?

Requirements

MTD’s long-term goal is to reduce errors by having a ‘digital link’ between your business’ software solutions (which record your invoices and accounting records) and HMRC.

To help the transition (and for the first year only) there is ‘soft landing’ approach, which means you do not have to have a digital link between your software and HMRC.

The soft landing period relates to VAT periods commencing 1st April 2019 and 31st March 2020. Within this timeframe, HMRC will allow copy and paste (stated in their paperwork as ‘cut and paste’) in lieu of the digital link.

There is one exception mentioned in the information published by HMRC, which is as follows. If you send your VAT data digitally via a specifically designed MTD app which is for the submission of the 9 box VAT return to HMRC via an API.

For specific guidance when using Microsoft Dynamics, please click here to read our page Making Tax Digital for Dynamics NAV.

Timelines

From 1st April 2019, all VAT registered businesses that exceed the VAT threshold (taxable turnover exceeding £85,000) will have to submit their returns electronically.

For a business that submits returns for 1st March 2019 to 31st May 2019, it means that the VAT for the period starting 1st June 2019 will fall under MTD regulations, although it will be within the soft landing timeframe (1st April 2019 to 31st March 2020).

This approach had been in a live pilot since Spring 2018. Here at CBIZ, we have been submitting our VAT returns via the Gateway, which is the government’s online portal. So far, it all works well, meaning that indications are good for a positive start to this initiative.

While there are plans to put more tax submissions through the MTD transformation, Corporation Tax will not be included until April 2020 at the earliest.

The December 2015 Roadmap from HMRC can be accessed by clicking here.

Further Details

Click here to view the HMRC overview of MTD.

Click to view detail rules, legislation, examples and exceptions.

There are two Rules of Law stated in the link above which we feel are worth highlighting:

  • A ‘digital link’ is an electronic or digital transfer or exchange of data between software programs, products or applications. The use of ‘cut and paste’ does not constitute a digital link.
  • If a set of software programs, products or applications are used as functional compatible software, there must be a digital link between these.

This digital link is required where the data to be included in any of the boxes of the VAT Return has been prepared within a software program, product or application, and this data is then transferred to another program, product or application in order to submit the VAT Return data to HMRC via the API platform.

NB: For VAT periods starting on or after 1st April 2020, there must be a digital link for any transfer or exchange of data between software programs, products or applications used as functional compatible software

Disclaimer

The above information provided on this webpage is general guidance and highlights specific points from HMRC and other sources. Please refer to the Making Tax Digital for VAT Notice for full details and/or seek legal advice as required.

If you would like to know more about Making Tax Digital, and compliance using Microsoft Dynamics please don’t hesitate to contact us.

 

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info@cbiz.co.uk

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