There are two major VAT system changes coming around April 1 2019. The first is the the UK’s withdrawal from the EU, which means we have yet to establish the implications of cross border trade and VAT accounting. The second is prevention of the ability to submit VAT returns via the government gateway for most organizations. If you would like to discuss your circumstances, please do not hesitate to contact Aston Black small business accountants Milton Keynes.
Making Tax Digital
On April 1 2019, mandatory VAT return system changes will come into effect. All business tax returns must now be digitally submitted to the HMRC instead of through the government gateway. The changes will mean that VAT returns starting on or after 1 April will be subject to the new rules. Making Tax Digital is designed to reduce tax errors and produce an additional £1bn of revenue for the Treasury by 2020.
The new software will be able to receive return information via their application programming interface program and then record and preserve all digital records to streamline VAT reporting and remove the possibility of further errors, but requires some work to ensure organisations are complying with the new rules.
HMRC have announced a deferment of implementation for some VAT registered organisations. This is restricted to specified bodies. HMRC have extended the deadline for MTD for VAT by six months for trusts, non-profits, VAT divisions and groups, certain public sector entities, local authorities, public corporations, traders based overseas, those required to make payments on account and annual accounting scheme users.
One important thing to bear in mind is the interaction with penalties for late submission and payment, so every VAT registration needs to be working to this standard and able to evidence appropriate care. If you prepare returns using an accounting package then your provider should be developing software to ensure compliance. If you use a spreadsheet then you will need some bridging software which will allow submission. There are a number of software developers offering suitable low cost solutions. Given HMRC expect this change to produce more revenue a review of your VAT accounting arrangements might be worth consideration.
Leaving the EU
If the UK leaves the EU without a trade deal, the HMRC have published guidance that the UK will likely be obliged to trade under World Trade Organisation rules and no longer benefit from simplifications currently available. The free movement of goods within Europe will exclude movements to and from the UK. The full HMRC guidance can be found here.
Businesses will need to ensure that they can continue to be trade and tax compliant with the new regulations. If you undertake any trade in other EU countries, you need to consider what the implications of a no deal exit will be and prepare before the deadline is confirmed.
We are working with a number of clients on planning for this scenario – which is only a few months away. Bearing in mind the implementation time (for example, registration lead times, invoicing changes, et al) this is a tight deadline for a fundamental change to tax compliance models for many clients.
Contact Aston Black accountants now for a free, no obligation discussion on what the April 1st changes mean for your business.