On 18 December 2017, HMRC published a collection of documents, including draft legislation, explaining in more detail what will be required when Making Tax Digital becomes compulsory for VAT in April 2019. The deadline for responding to the consultation, The Value Added Tax (Amendment) Regulations 2018, is 9 February 2018, which is unfortunately close to the self assessment deadline.
Visit our MTD hub for more details about the rules as we already know them.
The four new documents published on 18 December 2017 are
The draft regulations include the requirement for VAT records to be maintained using functional compatible software and specify which records must be maintained in electronic form. The exemptions for those who are digitally excluded and as well as for businesses in insolvency procedures are also set out.
The draft VAT notice indicates that multiple software programs can be used but these must be digitally linked (ie, no manual transfer of data between systems is permitted). The notice also deals with retail and flat rate schemes.
The addendum sets out in more detail how compatible software programs can be combined, including using spreadsheets, to submit VAT returns. Some adjustments (eg, partial exemption) are not included in the records which must be maintained digitally; these calculations can be performed separately outside the digital records with manual or digital entries to compatible software.
HMRC is proposing a 12 month soft-landing period, with no record keeping penalties, for businesses to all time to update legacy systems. During that period it will be acceptable for data to be transferred between software and spreadsheets manually, although the final submission will have to be made to HMRC using API (Application Programming Interface) enabled software.
The regulations mirror closely the previously published MTD for VAT overview to which the Tax Faculty responded (ICAEW representation 128/17) in November 2017.
Some of the key issues would appear to be:
The Tax Faculty would welcome members’ comments on the regulations well in advance of the 9 February deadline. Please email to email@example.com and firstname.lastname@example.org.
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