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Are You Prepared to Go Fully Digital with VAT?

Are You Prepared to Go Fully Digital with VAT?
"""As a small business owner, you are aware that all VAT returns have long been digital, i.e. online. However, you may be unaware that HMRC's plans do not end there. In less than a year, you will have a completely different set of requirements to meet.

Phase One of the new Make Tax Digital process will begin in April 2019. So, start planning now for the changes that will occur in the next tax year.

Making Tax Digital: What Are the Consequences?

The government now intends to make it more or less mandatory for you to buy or lease what they call functional compatible software, such as Clearbooks, to make all of your entries real-time. (Note to Mac users: check that your chosen solution will work in the UK).

This may mean that you will no longer have to go through paper records every quarter or year, but it does mean that you (or whoever does your accounting) will have to keep track of and record all types of expenses as they occur, as well as your invoicing.

It is claimed (based on representations from small business groups) that spreadsheets can still be used if linked electronically to HMRC, but this is only a stopgap measure that may prove problematic in practice.

VAT is the first to be implemented.

The first stage of what is expected to be a complete business tax transition by 2021 is that VAT records will be made digitally and continuously reportable beginning in April 2019.

Currently, VAT Returns only show total sales and purchases. After April 2019, you must digitally record every item, including the VAT element (zero-rate, standard-rate, etc.). All adjustments, including reverse charges on imports, car leases, subsistence, and entertainment, must be shown.

There are potential benefits and drawbacks:

Advantages:

Less physical paperwork and spreadsheet data collection/conversion
Avoiding VAT recording mistakes and potential fines
Disadvantages:

The additional cost of cloud accounting software (for current non-users)
Continuous recording replaces quarterly or annual work. Your accountant will most likely charge you extra hours for conversion and compliance.
Who is impacted?

Organizations with annual sales of £85,000 or more are required to register for VAT; those with sales less than that amount may choose to register if they believe they will exceed the amount in the current year or soon.

This includes not only limited liability companies, but also partnerships, sole proprietorships, public organizations, schools, and charities.

Those who are close to but below the threshold may now choose to withdraw from VAT registration or not join if they were planning to join otherwise. If you are unsure, we recommend speaking with us at Region Accountancy because there are arguments for and against, and each situation is unique.

There will be a 12-month 'honeymoon period' during which no penalty fines will be applied to VAT-registered businesses. Small operations that do not have external financial assistance will almost certainly require a period of adjustment.

With other taxes set to be converted to 'full digital' by 2021, HMRC believes that businesses will be better off in the long run. As always, the devil is in the details.

Let us meet early to ensure that you are not caught off guard by the new requirements and ways of working.

Website: http://www.find-uk-accountant.co.uk/articles/odiri-tax-consultants/107"""
 

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"Are You Prepared to Go Fully Digital with VAT?" was written by Mark under the Finance category. It has been read 116 times and generated 0 comments. The article was created on and updated on 13 January 2023.
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