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Partner-led advice

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LONDON: 0208 221 8282
CHELMSFORD: 01245 254780
COLCHESTER: 01206 867551
IPSWICH: 01473 359720

Email: info@lbgroupltd.com

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What is Making Tax Digital?

Making Tax Digital (MTD) is a government initiative to update how HMRC collects and processes agents and tax payers data, transforming from paper and online to digital. The primary aim of MTD is to make filing returns easier by utilising data already held by HMRC/tax payer/agent and making this a more efficient process.

What is MTD for VAT?

MTD for VAT, is the next focus for MTD and the government focusing on how it handles the data coming in from VAT returns.

How to be compliant for MTD for VAT?

The current minimum requirements for submitting a VAT return to HMRC are:

  • All accounting record keeping has to be in a digital format, HMRC has confirmed that excel is an acceptable format for this.
  • To submit the boxes 1-9 using HMRC API enabled software. This can either be in the form of a third party ‘bridging’ solution that reads and submits excel data or from the latest bookkeeping API enabled software such as Xero or Sage etc.

What are the deadlines?

So far the deadlines are:

MTD for VAT: periods beginning on or after 1 April 2019
Corporation tax: delayed and not expected until 1 April 2021 at the earliest and subject to change.
Income tax: you can already voluntarily make quarterly submissions to HMRC under their pilot scheme instead of filing annual tax returns. However, we recommend to hold off on doing this until plans are finalised. The Deadline is not expected until 1 April 2021 at the earliest and subject to change.

What are the exemptions?

Companies (including sole traders) whose turnover is below £85k registration threshold can carry on submitting their VAT returns using the online portal. They can also voluntarily submit their returns using the new MTD system.

Companies with more complicated VAT requirements are being deferred for MTD until October 2019 while further testing of software is undertaken. These are companies that fall into the following categorises are:

Click here to see the companies that fall into the following categorises of exemption
  • Trusts
  • ‘Not for profit’ organisations that are not set up as a company
  • VAT divisions
  • VAT groups
  • Public sector entities required to provide additional information on their VAT return, including Government departments and NHS Trusts
  • Local authorities
  • Public corporations
  • Traders based overseas
  • Those required to make payments on account
  • Annual accounting scheme users.

How LB Group can submit your return if you do not have capable software

If you do not currently own MTD capable software then you can send your excel spreadsheet to LB Group for this to then be processed and submitted using our in-house bridging solution. You will need to be a registered client under our HMRC agent authority for us to submit your return and you must be signed up to MTD. Quotations for this service are available from your usual LB Group representative.

Making Tax Digital – Action Required

The government has recently released further details on when to sign up to MTD, please see below specific dates.

When you sign into your government gateway there is now a warning message about signing up to ‘Submit your VAT return using Software’ and a link for how to sign up. You will need your company UTR and number. Your Company UTR can be found on a recent Corporation Tax return document and your company number can be found by searching for this on Companies House.

Once signed up, you are then required to authenticate your software with HMRC in order to submit the VAT return, the exact instructions for this will entirely depend on the software you have chosen.

Once signed up you have to continue submitting the VAT return in this way. If you haven’t

IMPORTANT: If you do not have MTD compatible software, then do not sign up, as once signed up, if you try to submit the VAT return by manually typing in the box 1-9 numbers via the government gateway then the return will not be accepted.

It can take up to 3 days to receive a confirmation email that you have successfully transferred to the new MTD system, therefore we advise that this is done 3 days before the VAT return submission due date.

Do not submit a VAT return until the confirmation email is received.

You must also wait until after the submission period for the last VAT return has passed so that you sign up for the correct quarter.

Direct Debits

If you have signed up to direct debits with HMRC, then there is a specified window for when the direct debit information will also be transferred to the new MTD system. If you sign up outside of this period then you will need to arrange to make the payment manually.

You should allow 15 working days for this information to be transferred, but also wait 5 working days after the previous VAT return submission due date. Please see below for the specified windows for each VAT return quarter/month.

Sign up windows for signing up to MTD are as follows (dates are inclusive):

  • First VAT quarter end June 19
    Sign up from and to: 8 May 2019 and 4 August 19
    If on direct debit sign up from and to: 15 May 2019 and 17 July 2019
  • First VAT quarter end July 19
    Sign up from and to: 8 June 2019 and 4 September 2019
    If on direct debit sign up from and to: 15 June 2019 and 15 August 2019
  • First VAT quarter end August 19
    Sign up from and to: 8 July 2019 and 4 October 2019
    If on direct debit sign up from and to: 13 July 2019 and 16 September 2019
  • Monthly VAT return (very small window to sign up for DD)
    Sign up from and to: 8 May 2019 and 4 June 2019
    If on direct debit sign up from and to: 15 May 2019 and 16 May 2019

 

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