IMPORTANT NOTE: If Taxfile is currently your agent to calculate and submit your VAT returns, you do not need to take any further action but we do hope you will take the time to read this newsletter & grasp the changes in law coming into effect. 
      
 
Let's start by understanding why the administration of taxation in the UK is changing & consider HMRC’s vision for the change.  We will then explore how these changes will subsequently affect you & your business.
From 1st of April 2019 HMRC’s VAT Notice 700/22 will come into effect; Making Tax Digital (MTD) for Value Added Tax (VAT).  The MTD initiative is believed to finacially benefit HMRC on two levels.
   
1. It will help to ensure the correct VAT is being paid to HMRC, & seeing that VAT accounts for the highest unpaid tax in the UK (35%), the government has estimated that it will generate £610M in 2020-21 from eliminating erroneous returns.  
2. The MTD initiative will also save HMRC money as it will no longer have the cost associated with maintaining the VAT portal where submissions are currently made, estimating a saving of £10M a year of taxpayers’ money. 
 
HMRC’s long-term vision is to have one of the most digitally advanced tax administration systems in the world & they hope that by 2020 they will have MTD applied to all of UK’s taxation processes.  
 
For this vision to be fulfilled, it is believed that they will then strive to have all taxation data recorded in the Standard Audit File for Tax (SAF-T) format.  Once this is achieved, HMRC will be able to undertake tax & VAT investigations frequently & randomly with very little cost, as it will free up resources from having to obtain & enter the data for analysis.
Can I be exempt from MTD?
Groups or individuals exempt from MTD include;
  • those with religious beliefs that prevent them from using technology
  • those going into insolvency
  • those that it is reasonably impractical to do so (eg. geolocation, physical &/or mental disabilities - that prevent the use of technology)
When will it apply to me?

The 1st quarter of your VAT return that starts on, or after the 1st of April 2019.
 
Being VAT registered means that your annual income equals or exceeds £85k, which is the current threshold value for 2018/19.  
 
Currently, any business or individual registered for VAT, whether on a Flat Rate Scheme or on the Standard Rate, will from April 2019 need to prepare for the changes outlined by Notice 700/22.
What are my responsibilities?
You will need to ensure that all your transactions (expenses & sales) are individually recorded digitally with a MTD-compliant software.  You still need physical &/or electronic copies of these records stored for at least 6 years.  The MTD-compliant software is then used to calculate & submit your VAT returns.
Currently, the date, NET & VAT amount all need to be digitally stored for each-and-every-one of your transactions.  It is also recommended that a digital upload of your bank feed is included to back the entries for both expenses & sales.  VAT will then be calculated using these digital entries & submitted to HMRC via the compliant software used to record them.
We have spent the last year preparing our business for this major change, ensuring we have the infrastructure for a well thought out, MTD compliant software at our core.  One that can cater for all the various ways we get data from our clients.  We have also brought in new staff members & trained existing ones with the technological know-how to tackle any challenges MTD may throw up. Our goal is to position Taxfile at the forefront of MTD in 2019 & beyond.  We are now fully resourced & ready to help our current & prospective clients in all areas of taxation & we hope to make their transition to MTD as seamless as possible.
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BATTERSEA BRANCH - Tel: 020 7821 9444
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(& Saturdays 10am-1pm by appointment).
 
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