Making Tax Digital for VAT

If your accountant hasn’t mentioned this yet, then you really ought to have a new accountant. Does this affect me? Are you VAT registered? Then if so, yes. This does affect you and you need to be considering whether you will be compliant in time. What is it? Making Tax Digital for VAT requires VAT registered businesses with taxable turnover above the VAT registration threshold to keep records in digital form and file their VAT Returns using software. It is increasingly common for business records and accounts to be kept digitally, in a software program on a computer or tablet, or in a smartphone application, or maintained through such a device and stored using a cloud-based application. The difference under Making Tax Digital is that the software which businesses use must be capable of keeping and maintaining the records specified in the regulations, preparing their VAT Returns using the information maintained in those digital records and communicating with HMRC digitally via our Application Programming Interface (API) platform. If your digital records are up to date, software will be able to collate and prepare your return for you. It will then show the return to you and ask you to declare that it is correct and confirm that you want to submit it to HMRC. Once you have submitted your return you will receive confirmation through your software that it has been received. Not all software is compliant, contact us to find out if your current software will be compliant and whether you need to take any additional step. When does this start? With effect from 1 April 2019, if your taxable turnover is above the VAT registration threshold you must follow the rules set out in this notice. If your taxable turnover subsequently falls below the threshold you will need to continue to follow the Making Tax Digital rules, unless you deregister from VAT or meet other exemption criteria (see paragraph 2.2 of this notice). Only businesses with taxable turnover that has never exceeded the VAT registration threshold (currently £85,000) will be exempt from Making Tax Digital. You will therefore need to keep an eye on your taxable turnover, especially if you think it is close to the VAT registration threshold. The Making Tax Digital rules apply from your first VAT period starting on or after 1 April 2019. A ‘VAT period’ is the inclusive dates covered by your VAT Return. Here are some examples. Example 1 – Existing business with taxable turnover above the VAT registration threshold on 1 April 2019 A business submits a quarterly return covering the period 1 March to 31 May 2019. The business taxable turnover exceeds the VAT registration threshold and therefore the business will need to comply with Making Tax Digital rules for the period starting 1 June 2019. Example 2 – Business with a taxable turnover above the Making Tax Digital threshold at the point they need to register for VAT A business that is not registered for VAT is required to register from September 2019 because the taxable turnover over the previous 12 months has exceeded the VAT registration threshold. The business must follow the rules in this notice for all VAT Returns they are subsequently required to make as their taxable turnover was above the VAT threshold when they...

read more

New HMRC Penalties

Making Tax Digital (MTD) New points based penalty model HMRC have been exploring changes to the penalty system for late submission failures under Making Tax Digital (MTD). They have now decided to adopt a points based model with the draft legislation expected in summer 2018. This will see the introduction of a system where late submission of a return or of the filing obligations under MTD attract points. A penalty will be charged for every failure to provide a submission on time once points have been accumulated up to a certain threshold. Penalty thresholds The penalty thresholds will be: Submission frequency penalty threshold Annual 2 points Quarterly 4 points Monthly 5 points Good compliance points reset After a period of good compliance, the government is ‘minded’ to use the following periods of good compliance before resetting penalty points back to zero. Submission frequency good compliance period Annual 2 submissions Quarterly 4 submissions Monthly 5 submissions Both the accumulation of points and any subsequent penalties will be fully appealable. When will this start? April 2019 sees the start of mandatory reporting of VAT obligations for all VAT registered businesses with a turnover in excess of £85,000. A 12 month soft landing period will follow, before the new points system commences in 2020. This will then be rolled out across the other taxes. What will the penalties be? The actual penalty amount has yet to be announced. Watch this space, once we know more details we’ll be sure to share...

read more

Tax Guide 2017/2018

Great news, our tax guide for 2017/2018 is online and can be downloaded here: Courtley West tax guide 2017 2018 If you have any questions or we can help you in anyway way, please don’t hesitate to get in touch.

read more

Changes to Making Tax Digital

We’re very pleased with HMRC’s announced changes to the roll-out of its Making Tax Digital scheme, which was due to go live from April 2018. The proposed scheme was far reaching and due to be implemented in a short timescale, however due to concerns from business owners, accounting professionals and software developers, HMRC have made a number of changes to the Making Tax Digital Scheme. Businesses that trade above the VAT threshold will now only have to keep records digitally for VAT purposes and only from 2019. Businesses will now no longer be asked to keep digital records or update HMRC quarterly for taxes other than VAT until at least 2020, instead of 2018 as originally proposed. Smaller business will be able to file digitally for other taxes on a voluntary basis. While we are skeptical of HMRC’s agenda we do believe that the taxpayer and the accounting industry should be given time to adapt to new methods of compliance regarding record-keeping. At Courtley West, we are comfortable with all the popular cloud platforms for record keeping and so you can be assured that when the MTD (Making Tax Digital) scheme goes live, we will be best placed to support...

read more

Changes to the VAT Flat Rate Scheme

From 1 April 2017 the VAT Flat Rate Scheme will be changing for some small businesses. Currently the flat rates percentages range from 4% to 14.5% depending on the type of business. The new percentage is 16.5% and applies to businesses with low expenditure relative to their sales. The test is if the VAT inclusive expenditure is either less than 2% of the VAT inclusive turnover or less than £250 per quarter then the new rate applies. Certain types of expenditure are excluded: Vehicles and other capital items. Food and drink purchased by the owners / employees. Unless the business is providing transport services such as couriers and taxis then the value of fuel and parts are also excluded. If you think your business may be affected by the changes to the Flat Rate Scheme, then it is worth checking using the criteria above and then comparing your VAT liability to the standard basis. For many small businesses it is worth considering leaving the vat flat rate scheme and returning to standard accounting. As always, we’re here to help. Get in touch if you’d like some help or...

read more