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HMRC is phasing in its landmark Making Tax Digital (MTD) regime, which will ultimately require taxpayers to move to a fully digital tax system.
Under the rules, businesses with a taxable turnover above the VAT threshold (currently £85,000) must keep digital records for VAT purposes and provide their VAT return information to HMRC using compatible software.
The rules apply from 1 April 2019 where a taxpayer has a 'prescribed accounting period' which begins on that date, or from the first day of a taxpayer's first prescribed accounting period beginning after 1 April 2019. However, for some VAT registered businesses with more complex requirements, the rules do not take effect until 1 October 2019. Included in the deferred start date category are VAT divisions, VAT groups and businesses using the annual accounting scheme.
Businesses in the deferral group should have received a letter inviting them to join the MTD for VAT scheme. The scheme will be mandatory for the first VAT return period starting on or after 1 October 2019. The letter encourages businesses to join early in order to be prepared. However, it does highlight that once a business has joined MTD for VAT, the old system of filing VAT returns can no longer be used.
Those affected should have received a letter in June from HMRC informing them of the extension to their deferral period. HMRC will write again later in the summer with details of the revised timetable.
For more information, please contact:
Senior Tax Manager
Tel: +44 (0)20 7430 5966