HMRC takes the next step towards its ambition to become one of the most digitally advanced tax administrations in the world with its pilot digital VAT reporting scheme. This was launched last week, six months ahead of its official roll out in April 2019.
What will the Making Tax Digital for VAT scheme mean for my business?
As of April 2019, if your business brings in over the VAT threshold (currently £85,000 per annum), then you will have to use the Making Tax Digital system. HMRC have produced mandatory software to enable taxpayers to collect data for their VAT returns and send them four times a year. Approximately one million companies will be using this scheme when it is up and running.
Who is in the pilot scheme?
Don’t worry, if your business is involved in the pilot scheme you already know about it. HMRC invited about half a million businesses with straightforward tax situations to participate. They will be using the scheme from this month to iron out any glitches.
Why are the government focused on ‘making tax digital’?
The government stat that they want the tax administration to be more effective, more efficient and easier for taxpayers to get their tax right. They think that the new VAT digital recording and reporting system will save businesses a lot of time and simplify their administration. Obviously, this is after the initial set up is completely understood.
The Director for Making Tax Digital for Business, Theresa Middleton, said: “Millions of people are already banking, paying bills and interacting with their suppliers and customers online. Using digital tools to help businesses manage their business income and expenses and get their tax right builds on this momentum and will also help them get more control over their finances.”
There is further support from the Financial Secretary to the Treasury, Mel Stride MP, who commented on the launch of the pilot scheme: “HMRC is transforming the tax administration so that it’s more effective, more efficient and easier for taxpayers. Today’s announcement means that around half a million businesses will be able to join Making Tax Digital and start filing their VAT returns online, making it easier to get their tax right first time. More and more businesses use digital tools every day to help them operate tax shouldn’t be different. This is a major step towards bringing VAT into the 21st century.”
What should I do if my business in the VAT bracket?
The very best advice is, don’t leave it until March to sort out how you are going to digitise your VAT admin. Get in touch with a tax expert as soon as possible, so you’ve got plenty of time to get your head round what you have to do. Remember, this is a mandatory change, there are no alternatives. There is a wealth of information published by HMRC here. If you’re still unsure about what you need to do, or you just want to check through your preparations please get in touch and we’ll make sure you’re all ready to go in April.
