By Alex Fish, manager
020 7490 7766
On 18 December 2017, HMRC published a raft of documents in relation to MTD for VAT. This draft legislation and further guidance confirms:
- who is in scope – businesses with turnover over £85,000 in the previous twelve months
- what digital record keeping is required - ‘functional compatible software’
- how additional information can and should be submitted – using an Application Programme Interface or API
There are also explanatory notes for the above items. So we now know that ‘functional compatible software’ is one or more programmes which can record and preserve electronic records, interact with the API to provide information and returns to HMRC and receive information back from HMRC. It seems pretty clear that HMRC will not be providing this.
The accounting and tax institutions have been in constant conversation with HMRC regarding the requirements and the practical impact on businesses. As a result, HMRC has made some concessions, specifically in terms of record keeping requirements, which are now broadly similar to the existing requirements.
There has also been a relaxation, to the extent of the digital links between spreadsheets and various software for certain businesses, such as those who are partially exempt. This, whilst the most practicable from the outset, is likely to be a short-term concession for the first year as HMRC and the software providers adapt their systems.
In addition to the above, HMRC has announced that a VAT pilot scheme will test the system, with selected participators, in anticipation of the mandatory start date of April 2019. Lubbock Fine has applied to HMRC to enter the pilot scheme. We think that we, and our clients, will benefit by keeping up-to-date with developments and possibly by allowing us to influence the design and functionality of the system. No clients will be signed up to the pilot without their prior approval.
If you are not yet using a software package to maintain your accounting records we highly recommend you start doing so this year in preparation of the year ahead. Please feel free to speak to Alex Fish email@example.com in our tax department or James Gilliand firstname.lastname@example.org in our outsourcing team on 020 7490 7766.