HMRC now requires that financial recordings and the filing of VAT returns be completed digitally, through functionally compatible software. This document outlines what to expect, how best to prepare ahead of this and what BDO can do to help.
WHAT YOU NEED TO KNOW MAKING TAX DIGITAL
THE KEY FACTS WHAT TO EXPECT
WHAT IS MTD? The requirement to keep digital financial records and file VAT returns via ‘functional compatible software’. VAT return submissions via the existing HMRC portal will no longer be possible. After a 12 month soft landing period, HMRC will also require digital links throughout the VAT audit trail. WHEN DOES IT TAKE EFFECT? For the majority of affected organisations, MTD comes into effect for VAT on 1 April 2019. For some organisations, including VAT group registrations, Payment On Account businesses, unincorporated charities, public bodies and local authorities, overseas businesses and annual accounting scheme users, MTD compliance does not take effect until October 2019. The implementation of other taxes will be phased in from April 2020 at the earliest. WHO DOES IT AFFECT? Any organisation with taxable turnover above the VAT threshold of £85,000. Are you required to implement MTD on 1 April 2019, or have you been deferred to October 2019? Has HMRC sent you a letter to confirm your start date? WHAT HAPPENS TO ORGANISATIONSWHO
HMRC believes Making Tax Digital will improve the tax return system and customer experience in four areas:
3 1 X X Transparency X X Tailored service X X No data duplication. X X Provide an overall view X X All data available in one location.
4 2
BETTER USE OF INFORMATION
TAX IN REAL TIME
X X Reduces errors X X Prevents the build up of owed tax and repayments.
INTERACTING DIGITALLYWITH CUSTOMERS
SINGLE FINANCIAL ACCOUNT
X X Greater time convenience X X Direct link to HMRC.
DO NOT COMPLY? Initially, HMRC will apply existing VAT record keeping penalties but, in the long term, it plans to introduce a points based penalty system based on late filing and number of errors.
BDO’S SOLUTIONS
IS MY ORGANISATION PREPARED FOR MTD?
Are you registered for VAT and are your taxable sales (subject to VAT) above the VAT registration threshold?
NO ACTION REQUIRED
VAT TECHNICAL HEALTH CHECK A review of your current VAT management and processes. Seeks to find errors and suggest improvements. VAT DATA ANALYTICS A review of your VAT data – is it accurate
NO
YES
NO
Are you currently using Excel or manual records to calculate your VAT?
Are you dealing with manual errors or adjustments regularly?
YES
ACTION REQUIRED
YES
and complete? We’ll ensure your calculations and data are accurate. SYSTEMS REVIEW
NO
NO
NO
NO
YES
We can assess your readiness for Making Tax Digital for VAT. If your current software is not suitable, we can help you identify the most suitable alternative. We can also assist with the creation of MTD compliant VAT return spreadsheet templates.
Are you using the latest version of your current software package?
Can your accounting software submit VAT returns directly to HMRC?
Is your data complete and accurate?
YES
YES
CLOUD ACCOUNTING We provide cloud accounting solutions to optimise and integrate your business operations.
ARE WE MTD COMPLIANT?
IS OUR ACCOUNTING SYSTEMMTD COMPLIANT? SYSTEMS REVIEW Review your current systems - are they MTD compliant? X X Can your current software: –– record and preserve records in electronic form? –– digitally link your VAT reports from source system(s) to the VAT return workings? –– provide VAT return information to HMRC in electronic form via an application programme interface (API)? X X Do you need a bespoke solution using an API-enabled spreadsheet or bridging software to ensure the required digital links? ARE OURVAT PROCESSES AND HOWWE HOLDOUR FINANCIAL RECORDS MTD COMPLIANT? VAT ADVISORY Review your current VAT management, processes and data to identify errors and how to avoid these in future.
TAKE OUR SELF-TEST NOWTO ASSESS HOW READY YOU ARE Just answer a few general questions on your business and we will email you a short summary of key VAT issues affecting your business. You can then follow-up with BDO’s team to help you start your planning in earnest. https://www.bdo.co.uk/en-gb/mtdfv-selftest
X X Are your records held digitally in your organisation? X X What reports are used to compile the VAT return? X X Are your calculations and data complete and accurate?
FOR MORE INFORMATION:
The proposals contained in this document are made by BDO LLP and are in all respects subject to the negotiation, agreement and signing of a specific contract. This document contains information that is commercially sensitive to BDO LLP, which is being disclosed to you in confidence to facilitate your consideration of whether or not to engage BDO LLP. It is not to be disclosed to any third party without the written consent of BDO LLP, or without consulting BDO LLP if public freedom of information legislation applies and might compel disclosure. Any client names and statistics quoted in this document include clients of BDO LLP and may include clients of the international BDO network of independent member firms. BDO LLP, a UK limited liability partnership registered in England and Wales under number OC305127, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. A list of members’ names is open to inspection at our registered office, 55 Baker Street, London W1U 7EU. BDO LLP is authorised and regulated by the Financial Conduct Authority to conduct investment business. BDO is the brand name of the BDO network and for each of the BDO member firms. BDO Northern Ireland, a partnership formed in and under the laws of Northern Ireland, is licensed to operate within the international BDO network of independent member firms.
MARK ELLIS INDIRECT TAXES PARTNER
+44 (0)121 352 6200 +44 (0)781 362 9444 mark.l.ellis@bdo.co.uk
IAN MCBANE BUSINESS SUPPORT AND OUTSOURCING PARTNER +44 (0)207 334 9191 +44 (0)793 233 7912 ian.mcbane@bdo.co.uk
Copyright © February 2019 BDO LLP. All rights reserved. Published in the UK.
www.bdo.co.uk
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