UK VAT Digital Returns and Digital Quarterly Reporting

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Received email from my accountant - I believe that the MTD will be delayed for some years as these IT projects usually always are delayed for years. However the VAT digital returns in 2019 may be on time. So still some time away, but I thought that I would give everyone a heads up.

What does Making Tax Digital (MTD) involve?

All affected businesses and landlords will need to start reporting their total income and expenses quarterly to HMRC. This will have to be done digitally, which means using accounting software or a suitable app.

These quarterly reports will have to be completed within one calendar month of the end of each quarter. There will then be a final return within 10 months of the year end which will enable corrections to be made to submissions during the year.

Who is affected and when?

Sole Traders and Partnerships
If sales are less than ÂŁ10,000 per year, then these rules will not apply at all.
If sales are between ÂŁ10,000 and ÂŁ85,000 per year (the VAT registration threshold), then MTD will start for any accounting period starting after 5th April 2019.
If sales are over ÂŁ85,000 per year, then MTD will start for any accounting period starting after 5th April 2018.
As a result of these rules, we will be recommending that any clients with 5th April accounting year ends change their year ends to 31st March. This will delay the start date of MTD by 12 months, which will be a major administrative saving and also provide more time to prepare for these changes.

Landlords

The rules are exactly the same as above for landlords, except that the option of changing the year end to 31st March is not available. This effectively means that large landlords will be among the first clients to be brought into MTD in April 2018.

Companies

All companies will be brought into MTD from April 2020 - there does not appear to be any exemption for small companies in this.

VAT

All VAT returns will have to be submitted directly from accounting software from April 2019, rather than by using HMRC online systems (which will cease to be available).

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I guess that the only question about this is the “when” rather than the “if”.

I did make representations to the various consultations about this, and for the life of me, in the context of a small family run business I can see no benefit whatsoever to either the business, the business person, or to the authorities themselves, with the possible exception that it is indeed just another series of target/s to be set by the authorities for which they can levy fines and penalties if they are not met.

Much has been made of the apparent simplicity of the level of information which will be required in interim.
For my part, our business files it’s quarterly VAT returns, which if I understand correctly, will contain more than these interim returns will require, rendering the value of the information somewhat questionable…I am sure we could debate this and more at great length.

Perhaps, most importantly and specifically, as far as Manager is concerned, the writing is on the wall here in the UK; in that returns of all types will have to be made in an automated fashion, and that the current facility where we can run a report in Manager, and then manually key those values into a web-page form will no longer be available/possible. This automated facility/system of course has been available for some time now, (and is mandatory for certain classes of reporting), and many software packages support that means of transfer/reporting to the authorities. IMHO, it would be desirable if Manager were to support this, as I prefer wherever possible to be as self-sufficient as possible. (However, for me it is not a deal-breaker as such).
If not, I will probably end up using my accountant as an intermediary who will make those submissions on my behalf, which I believe is what a great many people and businesses do in any case already. Either way, it is all perhaps another example of further tiers of administrative burden that we could all probably do well without.

Without wishing to mire this place with political opinions, I can only suggest that whenever these things come up for whatever passes for consultation, and debate in committee, and in the House, that we as individuals make our opinions very clear to the officials and politicians of all parties, both directly by our own efforts and through groups local and national, and any wider trade and industry bodies that we have access to.
Sometimes perhaps, a touch of the “Jean-Luc Picard” might be needed if the message is to be got across to these people who want to micro-manage us and every aspect of our lives.

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Yes my accountant and I are in agreement with you. Neither of us see what this will accomplish for anyone, us, the accountants or HMRC. I think the rational is that the concept of “real time” sounds futuristic so the government are keen to be onboard and have never actually asked themselves what problem they are trying to solve. In addition its also as you say a nice money spinner in terms of fines and penalties.

Like yourself I am keen to keep using Manager, so when this comes to pass, Manager will need to support this pointless government inititiative. Just thought that I would Lubos time to prepare. Its my understanding that the UK are not the only place that are considering implementing this so he will have to implement this for other countries anyway.

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Good news. This digital returns initiative has been watered down and delayed significantly and it will be 2019 at the earliest before this comes into place. Given that the UK government are realising just how complex Brexit is, I suspect that this will be delayed for several years as HMRC will be so busy with customs tariffs, etc that they won’t have time for this. We can hope. As much of the proposal has been watered down and details are still not clear, there is no point in Manager supporting this yet.