Making Tax Digital in the UK
Get set for digital returns
HMRC have set out their intentions to become one of the most advanced tax authorities in the world by enhancing the customer experience whilst also closing the tax gap. They aim to do this through the Making Tax Digital initiative, which will transform how HMRC deal with their customers.
Who does it affect?
Making Tax Digital (MTD) covers both individuals and businesses across a number of taxes. For businesses over the VAT registration threshold, VAT is the first tax selected for digitalisation in the UK. This will take effect from 1 April 2019 for most businesses. For Income Tax and Corporate Tax, MTD will not be mandated until April 2020 at the earliest.
So what does this mean for VAT registered businesses?
There are three key digital components to Making Tax Digital for VAT (
1. Digital records
Although this does not mean businesses will have to store each invoice and receipt digitally, the transaction data will need to be stored digitally. This includes an AP and AR transactional listing and a digital VAT account from which the VAT return is prepared.
2. Digital links
VAT returns must have digital links to digital records – spreadsheets can remain, but they will need ‘digital links’ to source systems. HMRC has announced a soft landing period of 12 months,
3. Digital submission
At present, most businesses submit their VAT returns through manually re-keying into HMRC’s online portal. This will no longer be permitted once Making Tax Digital comes into force and instead, VAT return submissions must be done digitally via HMRC’s Making Tax Digital API. Digital submission of VAT returns will be required for most businesses for periods starting on or after 1 April 2019.
VAT Return Filer is Deloitte’s online filing solution that gives you a simple way to manage and submit your VAT obligations without the need for you to install any software. For more information please download our flyer and contact us at MTDfVAT@deloitte.co.uk
As well as being listed on HMRC’s list of software suppliers supporting MTD for VAT, Deloitte
Below is a video which demonstrates how the tool will work.
A mandatory deferral for digital submission for businesses falling into one of the below categories will now apply until 1 October 2019:
- ‘Not for profit’ organisations that are not set up as a company
- VAT divisions
- VAT groups
- Public sector entities required to provide additional information on their VAT return (Government departments, NHS Trusts)
- Local authorities
- Public corporations
- Traders based overseas
- Those required to make payments on account
- Annual accounting scheme users
Application of the above deferral should be communicated by HMRC in writing. If you have not received a letter, we recommend following up with HMRC to obtain confirmation of the deferral. It is important not to assume that you will/won’t be deferred.
If you have received the deferral letter, please note that it does not necessarily cover all of your businesses entities – for example, single VAT registrations that operate outside of the VAT Group will still be required to comply with the legislation from April 2019. If there is any doubt this should be clarified with HMRC.
For further information on what this deferral may mean for your business, please reach out to us via your local Deloitte contact, or contact our mailbox.
How we can help
Depending on your existing tax and financial systems and processes, the switch to MTD for VAT may be relatively straightforward, using an appropriate software provider where you can link in existing data extracts. Alternatively, you may see this as a chance to transform the processes enabling your VAT return production and submission.