Making Tax Digital for VAT comes into effect from 1st April 2019. However, a HMRC pilot commences April 2018.
Businesses with a taxable turnover above the VAT registration threshold will be required to preserve digital records and provide VAT returns using compatible software. Software is the biggest challenge in moving to a digital VAT system. Businesses will have to use functional compatible software. This is software that connects to HMRC systems via an Application Programming Interface (API). HMRC want to pilot the changes in advance of April 2019.
There are many benefits of taking part in the pilot, for example; learning how to submit online at your own pace with increased HMRC support, influencing the digital system moving forward and providing feedback and immediate access to check if you’re completing the return correctly. This comes with the added security of no additional compliance checks or scrutiny.
Regardless of whether your business decides to participate in the HMRC pilot you should still be beginning to prepare for the digital changes. Businesses should be contacting their accounting software provider/internal teams to ensure they are aware of the changes and establish whether the existing software is adequate and prepared for the changes.
For further information, please contact our VAT specialist, Nigel Smith.