Happy new tax year, 1 April 2019

Apr 01, 2019

Making Tax Digital (“MTD”) takes effect today, 1 April 2019, and applies to any VAT-registered business with a turnover exceeding the current VAT registration threshold of £85,000 and which has not received confirmation from HMRC that MTD for VAT is deferred to 1 October 2019. It’s also just 5 days to the new tax year 2019/20 commences and brings into effect a plethora of changes to the UK tax system.

MTD applies to the first VAT return period commencing on or after commencement (either 1 April 2019 or 1 October 2019).

At the heart of the regulations are two core requirements:- 

  • Digital record keeping – for the first time businesses will be required to keep and preserve digital records; and
  • Electronic filing of VAT returns – to submit a VAT return, for the first time businesses must use information stored in their digital records combined with “functional compatible software” to submit VAT returns directly to (and receive responses from) HMRC. 

HMRC have recently announced more details of the soft landing for MTD for VAT. During the “soft landing” period only (i.e. the first year from either 1 April 2019 or 1 October 2019), where a digital link has not been established between software programs, HMRC will accept the use of cut and paste as being a digital link for these VAT periods. Cut and paste will not be acceptable after this period has elapsed. VAT Notice 700/22: Making Tax Digital for VAT sets out this and the “soft landing” in more detail.  

At the Spring Statement it was also confirmed that MTD will not be made mandatory for any other taxes or businesses in 2020. The government also confirmed that there will be a “light touch” approach to penalties in the first year of implementation of MTD. Where businesses are “doing their best to comply, no filing or record keeping penalties will be issued”.  

This soft landing does not apply to late payment penalties (default surcharges) which are unchanged. HMRC are also warning that signing up for MTD for VAT takes at least seven days.  

The restriction which prevented overseas businesses from joining the MTD for VAT pilot has now been removed. All businesses except those that use the VAT GIANT system can now join the MTD for VAT pilot.  

Once a business has been signed up to MTD for VAT it is not longer possible to file returns through the government gateway VAT return or using XML VAT filing software.  

The following documents relevant to Making Tax Digital have recently been updated:- 

Take a look at our MTD hub for more on this important change.