Putting Making Tax Digital for VAT into Practice

Although there has been much discussion over whether the start of Making Tax Digital for VAT will be delayed, there’s no sign of the initiative slowing down.

This means
the vast majority of VAT-registered businesses will have to comply with Making
Tax Digital for VAT in respect of VAT periods beginning on or after 1 April
2019, although certain entities, such as unincorporated not-for-profit
organisations and businesses with complex VAT requirements, will not be
mandated to comply with Making Tax Digital for VAT until 1 October 2019.

As a
result, accounting practices only have a few months to get their clients ready
for the changes to VAT return filing that Making Tax Digital will bring.

Below we outline how IRIS has put solutions in place to help your practice prepare for this new digital regime.

If Your Clients Meet the Making Tax Digital for
VAT Criteria

Businesses
that are VAT-registered with taxable turnover above the VAT registration
threshold (currently £85,000) will be required to comply with Making Tax
Digital for VAT.

In short,
this means that affected businesses will have to store digital VAT records and
file digital VAT returns to HMRC using software that is compatible with the
Making Tax Digital platform.

For accounting firms with clients that fall within the remit of Making Tax Digital for VAT, we have a range of tax software and bookkeeping solutions so that you are able to file your clients’ VAT returns digitally to HMRC

All of our tax and VAT filing products have been recognised by HMRC as being compatible with Making Tax Digital for VAT and offer integrated filing solutions that should ensure ease of filing under the new regime.

If Your Clients Are Below the Making Tax
Digital for VAT Threshold

Not all
businesses will be required to comply with Making Tax Digital for VAT.
Specifically, businesses that are VAT registered but have taxable turnover
below the VAT registration threshold can continue to file their VAT returns
online as normal, although these businesses are able to opt to join the Making
Tax Digital for VAT regime if they wish.

As not all
businesses will be affected by Making Tax Digital for VAT, there will be a
mismatch between clients in accounting firms, as some clients will be required
to comply with Making Tax Digital for VAT while others won’t.

Firms will
therefore have to decide how best to file their clients’ VAT returns, taking
into account the different filing requirements that their clients may be
subject to. Generally, firms could choose to approach this mismatch in one of
two ways.

Firstly, accounting practices could choose to adopt a piecemeal approach when it comes to filing. This would involve filing VAT returns for clients outside the scope of Making Tax Digital for VAT in the same way as they have previously done, while filing VAT returns for those clients within Making Tax Digital for VAT using our links to compatible software, as outlined above.

However, if firms would like a solution that enables them to file all their clients’ VAT returns from one location, regardless of whether that client is within the Making Tax Digital for VAT regime, then there is another answer.

Specifically, IRIS will be providing a bridging solution to VT Software, a bookkeeping software provider that enables VAT return data to be exported to bridging software so that it can be filed with HMRC. This means that all clients’ VAT returns can be filed from the same place, taking the stress out of filing different VAT returns on different platforms.

Getting Your Clients Ready for Making Tax
Digital

As Making
Tax Digital for VAT represents one of the biggest shifts in VAT reporting in
recent years, the earlier your practice can be prepared the better.

The first step is to take time to review your existing client list and identify which clients will come under the scope of Making Tax Digital for VAT, as this will help your firm communicate with those clients about the upcoming changes to their VAT filing and record-keeping requirements.

What’s more, it will also enable your practice to understand how many clients will have to comply with Making Tax Digital for VAT, and how many clients will not have to transition to the new regime. This will then give you the opportunity to decide which VAT return filing solution is right for your practice.

Find out more about Making Tax Digital and the latest updates on our perspectives page.

If you need any further information about your clients’ VAT filing options under Making Tax Digital for VAT, don’t hesitate to speak to a member of the IRIS team for advice. Alternatively, take a look at our new tax and accounts software for a cloud solution with a difference.