DSR Tax Claims is urging businesses, which are over the VAT threshold, to prepare ahead of the Making Tax Digital VAT rollout, due on 1 April 2019.
David Redfern, Managing Director of DSR Tax Claims, has issued guidance to affected businesses in order to assist them to prepare for the start of the mandatory requirement that VAT records be digitised for all businesses with a taxable turnover of £85,000, the current threshold for VAT registration. Businesses below the current threshold, who are currently registered for VAT, may choose to opt into Making Tax Digital (MTD) for VAT but are not legally obliged to.
HMRC issued its VAT Notice 700/22 earlier this month, to provide businesses with further information regarding the MTD for VAT requirements which will make digital VAT returns mandatory for VAT periods beginning on or after the 1April 2019.
David explained: “All businesses with a taxable turnover greater than the VAT threshold will have to keep their VAT records digitally and send their VAT returns to HMRC using MTD-compatible software for VAT periods which begin on or after 1 April 2019. So, if your VAT accounting period runs from 1 March 2019 to 31 May 2019, your next VAT period beginning 1 June 2019 will need to be MTD-compatible.”
He added that businesses which subsequently fall below the VAT threshold will continue to be required to send digital returns. However, certain exempt groups would be permitted to opt in or out of MTD by informing HMRC in writing. Exempt groups include those for whom digital VAT returns are not reasonably practical due to disability or remote location, as well as certain religious groups.
David has also warned businesses that they may still be required under law to keep non-digital VAT records, depending on the nature of their software and any legal requirements to preserve them in their original form.
He continued: “The future may be paperless but MTD won’t initially remove the requirement to keep any physical business records. Depending on the software and data recorded, it may still be necessary to retain a paper copy of the business record – for example, where only certain data is recorded from an invoice, you would still be required to retain a copy of that invoice for your business records because the software wouldn’t be recording all the data from the invoice.
“Where the software scanned and saved an image of the entire invoice, the business may not need to require a physical copy, though some records are required by law to be retained in their original form.”
Businesses are also being cautioned to consider their data backup arrangements are carefully in order to ensure that vital financial data is not irretrievably lost in the event of technological failure.
David concluded: “HMRC have designated a certain ‘soft landing’ period to allow businesses to get all required digital links in place. This means that for the first 12 months of ‘mandation’, businesses won’t be required to have all their digital links fully operational so if your first affected VAT period begins on 1 April 2019, you will have until your first VAT return period on 1 April 2020 to ensure that all your links communicate automatically.
“This doesn’t mean that you don’t have to submit a digital VAT return though – it just means that you have a 12 month soft landing period to ensure that all of your digital links communicate with each other to eliminate any manual intervention. The soft landing period doesn’t mean that you can relax about MTD – you may require that period to ensure that all your software functions together.”
