1st April –  potentially a big date for VAT in more ways than one!

One thing is for certain April 1st 2019 is going to be a big date for the VAT system in the UK. Firstly we see the advent of Making Tax Digital (‘MTD’). However should there be a “no deal” on BREXIT this could mean there are further significant ramifications for the VAT system in the UK.

Every tax advisor will be aware that MTD will mean you will no longer be able to submit returns through the government gateway and must use software that will allow digital submission to HMRC.  The changes will mean that VAT returns starting on or after 1 April will be subject to the new rules.

The MTD software checklist

Whatever software your clients use must be able to –

• Record and preserve digital records;

• Provide HMRC with information and returns from data held in those digital records; and

• Receive information from HMRC via their Application Programming Interface (‘API’) Platform

• The software must have digital links so that there is a record of the ‘digital journey’ of the data.  HMRC are allowing a ‘soft landing’ on digital links with full requirements needed to be met by 31 March 2020. This is a legal obligation.

Undoubtedly this is one of the most significant changes we have seen to the VAT return system in many years.

HMRC have postponed the implementation for some VAT registered organisations. So the following organisations have had the deadline delayed for a further 6 months….

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

Most tax advisors hope HMRC will apply a light touch to penalties when the system is introduced.  It is expected that HMRC will focus on reasonable care when considering penalties, so every VAT registration needs to be working to this standard and able to evidence appropriate care.

If you prepare returns using an accounting package then your provider should be developing software to ensure compliance.  If you use a spreadsheet then you are likely to need some bridging software which will allow submission. There are a number of software developers offering solutions.

If you haven’t recently reviewed your VAT accounting arrangements now is the time to do it especially as HMRC have suggested they expect this change to produce more revenue.

The effect on VAT with a “no deal” BREXIT

HMRC have published guidance on the likely consequences if the UK leaves the EU without a deal.  It states that UK businesses will have to apply customs, excise and VAT procedures to goods traded with the EU, in broadly the same way that already applies for goods traded outside of the EU.

So essentially the guidance suggests the UK will be obliged to trade under World Trade Organisation rules and no longer benefit from simplifications currently available.  The free movement of goods within Europe will exclude movements to and from the UK.

The full HMRC guidance can be found following on the following link……

One thing is certain businesses will need to ensure they can continue to trade, collect any tax due, be tax compliant and avoid any penalties that could apply.

If your clients  undertake any trade in other EU countries you will clearly need to consider what the implications of a no deal exit will be and get them ready long before the deadline crystallises.

All in all April looks set to be a significant month of the VAT system in the UK.

The Tax Recruitment Company and its directors and staff do not provide tax, legal, or accounting advice. This communication/material has been prepared for general information purposes and guidance only. This communication/ material does not constitute tax, legal, accounting or other professional advice, and should not be relied on or treated as a substitute for any such specific advice relevant to particular circumstances.  You should consult your own tax, legal and accounting or other professional advisors for any specific advice following receipt of this communication/material.  

The Tax Recruitment Company and its directors and staff do not provide tax, legal, or accounting advice. This communication/material has been prepared for general information purposes and guidance only. This communication/ material does not constitute tax, legal, accounting or other professional advice, and should not be relied on or treated as a substitute for any such specific advice relevant to particular circumstances.  You should consult your own tax, legal and accounting or other professional advisors for any specific advice following receipt of this communication/material.

The Tax Recruitment Company and its directors and staff do not provide tax, legal, or accounting advice. This communication/material has been prepared for general information purposes and guidance only. This communication/ material does not constitute tax, legal, accounting or other professional advice, and should not be relied on or treated as a substitute for any such specific advice relevant to particular circumstances.  You should consult your own tax, legal and accounting or other professional advisors for any specific advice following receipt of this communication/material.

The Tax Recruitment Company and its directors and staff do not provide tax, legal, or accounting advice. This communication/material has been prepared for general information purposes and guidance only. This communication/ material does not constitute tax, legal, accounting or other professional advice, and should not be relied on or treated as a substitute for any such specific advice relevant to particular circumstances.  You should consult your own tax, legal and accounting or other professional advisors for any specific advice following receipt of this communication/material.

The Tax Recruitment Company and its directors and staff do not provide tax, legal, or accounting advice. This communication/material has been prepared for general information purposes and guidance only. This communication/ material does not constitute tax, legal, accounting or other professional advice, and should not be relied on or treated as a substitute for any such specific advice relevant to particular circumstances.  You should consult your own tax, legal and accounting or other professional advisors for any specific advice following receipt of this communication/material.

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