Making Tax Digital – are you ready for 1 April?
Paper returns have long been obsolete, and now HMRC are discontinuing their online form moving towards a more detailed approach. Traditionally you, or someone on your behalf, would submit a summary of input and output tax on a monthly, quarterly or annual basis, as a result HMRC would not have access to the underlying data unless they requested it. With the rise of technology HMRC are now asking for the detailed workings to be submitted alongside the VAT return.
As of the 1 April 2019 HMRC require all VAT registered businesses to report VAT digitally, rather than use the online HMRC portal. This has to be done with additional software, and in most cases, is compulsory. This is the first step of HMRC’s ‘Making Tax Digital’ (MTD) initiative. The next step is to introduce other taxes including Self Assessment and Corporation Tax after April 2020 and we are still waiting on guidance on how that will work.
What are my options?
Major software suppliers are now on a hard push to make sure everyone has up to date software in preparation for the April deadline. If you are VAT registered, or suspect you may exceed the £85,000 threshold, this will impact you.
At the moment, HMRC are currently listing all suppliers of software for submitting VAT returns. They have not released their own software and it appears that an HMRC developed solution will not be available in time for the roll out.
We support the major software suites – Xero, Quickbooks, and Sage. If you are using Xero or the online version of Quickbooks or Sage (known as Quickbooks online or Sage Business Cloud Accounting/Sage One) then you will be able to submit VAT returns under the new system.
If you are using a desktop version of Sage (such as Line 50, or Sage 50 Accounts), Quickbooks desktop or any other older accounting system then it is likely you will need to upgrade or change. Only the latest version of sage or quickbooks will file using the new system, and certainly in the case of sage, you will need to pay monthly to make sure that you software is always up to date.
If you are using cashbooks or spreadsheets then you will need to be moved onto a digital accounting system, like Xero, or ask your accountant to help you file. If you are using spreadsheets then we can help, please get in contact.
How urgent is it?
Any return with a period starting after 1 April 2019 will need filing using Making Tax Digital supported software, HMRC will not accept any paper returns or using the HMRC GOV.UK portal as you have previously done, unless you have been granted a deferral or dispensation.
The table outlines how you can file your VAT return based on your quarter end:
|VAT quarter end||Filing deadline||Filing Method||Notes|
|28 February 2019||7 April 2019||GOV.UK/HMRC portal|
|31 March 2019||7 May 2019||GOV.UK/HMRC portal||You can opt in 6 days after filing this return (or on 1 April if your last return was 31 Jan or 28 Feb)|
|30 April 2019||7 June 2019||Making tax digital software||You must opt in by 4 June 2019, or 23 May 2019 if you pay by direct debit.|
|31 May 2019||7 July 2019||Making tax digital software|
What if I miss the deadline?
HMRC are not closing their VAT portal, however they will discount your VAT return submitted in this way unless you have a dispensation from Making Tax Digital – HMRC will penalise for non compliance, and not reporting VAT will carry its own penalties and interest charges. Once you are submitting with Making Tax Digital systems you will not be allowed to go back to the portal.
Making tax digital is an opt in system, this is to make sure that anyone who has been deferred can still submit their returns. You should wait 6 days after your final GOV.UK portal VAT return has been filed to sign up, but this needs to be no later than 48 hours before your first Making Tax Digital return is due, or 15 days before if you are paying by direct debit.
At OS Accounting, we are ready for Making Tax Digital, and proactively supporting clients in their move onto this new technology. Its a great time to update your accounting software, and there are alot of new an time saving technologies thanks to the cloud. If you need help converting onto a new accounting system, or need to prepare for filing your VAT return, we have solutions that will have you up and running with minimal fuss.
For more information, please contact us.