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Are you VAT-registered? If you are, changes are on their way.

Are you VAT-registered? If you are, changes are on their way.

From April next year, VAT-registered non-complex businesses, trading over £85,000 will have to make sure that the records they keep are digital and in a format that can be shared with HRMC.

Businesses defined as complex have until October 2019 to comply.

According to Chris Downing from KPMG complex businesses are defined as:

  • trusts or ‘not for profit’ organisations that are not set up as a company
  • public sector entities required to provide additional information on their VAT return (Government departments, NHS Trusts),
  • VAT divisions/groups & local authorities, public corporations, traders based overseas
  • those organisations required to make payments on account and annual accounting scheme users.”

According to the Greater Birmingham Chamber of Commerce the changes are part of Making Tax Digital (MTD),

“the Government’s ambitious plan to bring the UK’s tax system into the 21st century by transforming the way taxpayers interact with HMRC.”

The software that you use needs to be compatible with Application Programme Interface (API). The Chamber explains that “The API will create a link between the business’s accounting software and HRMC’s systems”. It aims to make it easier for businesses to  stay in control of their finances and their tax.

The good news is that the HRMC have confirmed that there will be a 12 month ‘soft landing’ so you will be given time to meet the requirements if you aren’t ready by April (or October) 2019.

 The bad news is that they are not providing any free software. The responsibility lies with us. Paper-based records will no longer be acceptable and Microsoft Excel will also need supplementing.

So what should you do to begin with?

Step 1 – Make sure you know which deadline applies to you. 

Step 2 – If you use accounting software already, get in touch with them. Ask how they are planning to deal with the changes. 

Step 3 – Talk to your accountant. Ask for his or her advice so you can create an action plan.

We do have the 12 month ‘soft landing’ regardless of which deadline applies to us however, our advice would be, don’t be lulled into a false sense of security. As we know, these things always take longer than we think!

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