With less than a week to go until the 1 April 2019 Making Tax Digital (MTD) deadline, please find below an update on what you need to know, now.
If you are not sure if you are impacted by the new rules, then please check out our previous article here.
What should I do now?
If you are not yet on a digital system that is MTD compliant it is important that you have a plan in place for how you will deal with MTD now. HMRC have indicated that they will apply penalties for those that don’t comply.
If you are changing systems, it is best to have this set up ready to use from the start of the first VAT return affected, which will be the first VAT period beginning after your mandation date. For example, if you are mandated from 1 April 2019 and have a 30 April 2019 VAT quarter end you ought to have the system in place ready for use from 1 May 2019 i.e. the first return that would fall under MTD (being the quarter ending 31 July 2019).
If your system is not MTD compliant then you need to find an MTD compliant software urgently and we recommend that you contact Gavin Hooker or your account manager at Friend & Grant who will be able to advise.
When should I register for MTD?
Businesses that are subject to MTD will need to register for this with HMRC online. It is important to get the timing of this right and not register too early. You can voluntarily sign up early to MTD, however, this will affect any current VAT return period you are in and you would need to check that your accounting system is MTD compatible before signing up.
You need to wait until the deadline has passed for your last VAT return under the old rules and any payment has cleared before registering. The earliest you can sign up to MTD is 5 working days after the deadline for submission for your previous reporting period. The latest you have to sign up to MTD is 7 working days before the end of your first MTD reporting period. For example, if your VAT quarter ends on 30 April 2019 this return is due under the old HMRC system by 7 June 2019. You can then sign up to MTD for the quarter ending 31 July 2019 from 14 June 2019 until 28 August 2019. This VAT return is then due to be submitted under MTD (and paid) by 7 September 2019.
Once you have registered for MTD, HMRC will contact you by email, within 72hrs. You must wait for this confirmation before submitting your next return. HMRC are moving to a paperless communication approach, so you will be receiving emails from them in future, so be careful when moving emails to junk or spam!
As a reminder the current VAT portal will remain open for those VAT registered businesses that are under the threshold and who have therefore registered for VAT voluntarily.
Are there any exemptions?
HMRC have now updated the VAT notice for MTD and issued further guidance for taxpayers who consider themselves to be exempt. This guidance covers where:
- It’s not reasonably practicable for you to use digital tools to keep your business records or submit your VAT returns because of age, disability, remoteness of location or for any other reason.
- You or your business are subject to an insolvency procedure.
- Your business is run entirely by practicing members of a religious society or order whose beliefs are incompatible with using electronic communications or keeping electronic records.
The notice goes on to state that HMRC will not give an exemption purely on the basis that reasonable effort, time and cost may be involved in making the transition to Making Tax Digital. This goes for choosing and buying any new hardware or software or learning to use them.
HMRC have confirmed that those under the threshold or those already exempt from filing VAT returns online do not need to apply for an exemption.
To find out more about HRMC’s exemptions, and how to claim for an exemption, please click here.
What about a deferral period?
It seems that some of the businesses that meet the criteria for the six month deferral have received letters from HMRC with a mandation date of 1 April. If you are one of these and wish to take advantage of the deferral period, you can write to HMRC to inform them.
HMRC must have written to you to confirm your deferral.
For further information please speak with your account manager or Darren here or on 01634 731390.
The content in this blog is correct as at 25 March 2019. See terms and conditions.