From 1st April 2019, most VAT-registered businesses will need to keep digital records and utilise MTDfV-compatible software in order to file their VAT returns.
Certain businesses have been granted a six-month deferral, and will not need to adhere to VAT obligations until 1st October 2019. In any case, it makes sense for all relevant companies to make preparations for MTDfV as soon as possible, and we recommend that any affected business-owners seek advice from a qualified accountant to ensure that their obligations are met.
How should businesses prepare for MTDfV?
The first requirement is that businesses create a ‘digital link’ between the software that holds the data for the VAT return, the bridging software and HMRC’s MTDfV platform. A ‘digital link’, according to HMRC, is when data is exchanged electronically between software programmes without any manual input (i.e. without copying any information over by hand). Previously a business might have used a number of manual steps within their VAT return process: manually transferring data from accounting software to a spreadsheet that calculates VAT return figures, for example, after which point the figures would be sent to bridging software that eventually submits the return to HMRC. From April 1st 2019 (or 1st October 2019 for eligible businesses), MTDfV requires a digital link between crucial steps in this journey.
It is important the companies do not underestimate the challenges of MTDfV – particularly in the context of Brexit, which will also necessitate large-scale system changes for many businesses. It should also be remembered that most businesses will be expected to adhere to MTD on a wider scale by 2020, when other tax requirements will transfer over to the new system.
Here are some of the key things that VAT-registered businesses should consider prior to their MTDvF deadline:
- Undertake a thorough analysis of your existing accounting systems and the journey of information. At which points will digital links be necessary (both in terms of the impending 2019 cut-off point for VAT and the 2020 deadline)? Transfers from non-API enabled spreadsheets will not be acceptable by 2020, and for many businesses this will necessitate an in-depth reform of current processes. It would be worth making changes sooner rather than later to ensure minimal business disruption in 2020.
- Review the data requirements for MTDfV in detail, ensuring that you are up to speed with exactly what data you need to share with HMRC, when, and whether your current processes capture data of sufficient quality so as to be fit for purpose.
- Check if your existing software will be updated in line with the new MTD requirements. If not, review the HMRC-compatible software options that are available, and select a programme which will meet both the needs of your organisation (bearing in mind both the 2019 and 2020 deadlines) and that of HMRC.
- Make sure all key stakeholders are aware of the date on which your business must switch to MTDfV. HMRC has contacted all businesses to confirm whether they are required to commence MTDfV protocols from 1st April or 1st October 2019. Have you received the letter which confirms your start date?
MTDfV: Instruct IBISS & Co for a Smooth Transition
At IBISS & Co, our experienced team of accountants and specialist tax advisers are ready to help with a vast array of tax-related matters, from MTDfV to Brexit. If you’re preparing for the transition to MTD, we can perform a comprehensive analysis of your existing systems, identifying any gaps or potential issues, before proposing workable, cost-effective solutions to remedy these ahead of the relevant deadline. In addition, we are in touch with HMRC on a regular basis and can keep you apprised of any updates, ensuring that your business remains ahead of the curve.