Tag Archives: MTD

VAT: Making Tax Digital (MTD) New Regulations

By   5 March 2018
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The regulations for MTD have been published. These are known as The Value Added Tax (Amendment) Regulations 2018 and full details are available here

The Regulations set out that businesses to which the Regulations apply (see below) will be required to retain electronic records using functional compatible software and submit VAT returns via an Application Programming Interface (API) platform. HMRC has previously announced that acceptable software will include spreadsheets, but these will be required to be used in specific ways.

We are yet to see precise details of the relevant software and API platform, but it makes sense for VAT registered businesses to consider the implications of MTD and to plan for its introduction. 1 April 2109 seems a way off, but as always, it’s best not to wait until the last minute.  We expect more information in the coming months and we will endeavour to keep you up to date.

Background

MTD for VAT will come into effect from 1 April 2019. From that date, businesses with a turnover above the VAT threshold (currently £85,000) will have to:

  • keep their records digitally (for VAT purposes only), and;
  • provide their VAT return information to HMRC through MTD functional compatible software

What is compatible software?

The VAT Notice defines “functional compatible software” as “a software program or set of compatible software programs the functions of
which include—recording and preserving electronic records in an electronic form; providing to HMRC information from the electronic
records and returns in an electronic form and by using the API platform; and receiving information from HMRC using the API platform in
relation to a person’s compliance with obligations under these Regulations which are required to be met by use of the software”.

Submission to HMRC may be either through linking/bridging software or via API enabling the spreadsheets to access HMRC APIs and report data to HMRC systems.

What HMRC say about MTD

MTD was introduced with the following comments:

“The government recognises that the majority of businesses want to get their tax right, but the latest tax gap figures published by HMRC show that too many otherwise compliant businesses find this hard, even some who use an agent to help them. As a result over £8 billion a year in tax is lost from avoidable taxpayer errors.  This not only costs the public purse, it also causes businesses cost, uncertainty and worry when HMRC is forced to intervene to put things right.

HMRC wants to do more to help businesses get their tax right and MTD is a very important step in that direction. It will help businesses steer clear of avoidable errors, and give them a clearer view of their tax position in-year.

Businesses (including self-employed and landlords) will keep records of their income and expenditure digitally, and send summary updates quarterly to HMRC from their software (or app).

MTD will bring the tax system into line with what businesses and individuals now expect from other online service providers: a modern digital experience

MTD will help businesses get their tax and NICs right first time. That will reduce the likelihood of errors, giving businesses greater certainty

MTD is anticipated to take out around 10% of error on an ongoing basis, and give businesses a clearer view of their tax position in-year, enabling them to plan to meet their tax obligations at minimum cost and minimum disruption…”

 Please contact us if you have any queries or would like to discuss MTD.

Digitisation of the VAT Retail Export Scheme – Update

By   23 February 2018
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What is the VAT Retail Export Scheme (VAT RES)?

The VAT RES allows:

  • overseas visitors (generally, persons who live outside the EC) to receive a refund of VAT paid on goods exported to destinations outside the EC
  • retailers to zero-rate goods sold to entitled customers when they have the necessary evidence of export and have refunded the VAT to the customer

Such treatment is subject to a number of conditions:

  • the customer must be entitled to use the scheme
  • the goods must be eligible to be purchased under the scheme*
  • the customer must make the purchase in person and complete the form at the retailer’s premises in full
  • the goods must be exported from the ECby the last day of the third month following that in which the goods were purchased
  • the customer must send the retailer or the refund company evidence of export stamped by Customs on an official version of Form VAT 407, an approved version of Form VAT 407 or an officially approved invoice
  • the retailer or the refund company must not zero-rate the supply until the VAT has been refunded to the customer

Typically, a retailer will charge UK VAT to an overseas visitor until the visitor has returned the appropriate documentation which has been suitably stamped at the port of departure from the UK.

* Certain goods are excluded from VAT RES. These include; motor vehicles for personal export, boats sold to visitors who intend to sail them to a destination outside the EC, goods over £600 in value exported for business purposes, goods exported as freight or unaccompanied baggage, unmounted gemstones, bullion, goods consumed in the UK and goods purchased by mail order including those purchased over the Internet. (This list is not exhaustive).

Full details of VAT RES scheme here https://www.gov.uk/government/publications/vat-notice-704-vat-retail-exports/vat-notice-704-vat-retail-exports

VAT RES is a voluntary scheme and retailers do not have to operate it. Those who do must ensure that all the conditions set out in the above notice are met. In certain areas (such as the West End of London) businesses which offer VAT RES have a commercial/price advantage over those shops which do not.

So what is new?

HMRC has recently (this month) provided an update on their project to digitise the VAT RES system, to improve the efficiency for both retailers and travellers, and also to help reduce fraud. Details here

https://www.att.org.uk/sites/default/files/180213%20VAT%20Retail%20Export%20Scheme.pdf

We are able to advise further on this matter if required.