16 | FEBRUARY 2019
News
Read online at www.proinstaller.co.uk
VAT CHANGES - ARE YOU READY?
Even though it’s now the law and the deadline is only weeks away, many installers are still unaware of
MTD, also known as Making Tax Digital. That’s OK if you’re not VAT registered, but otherwise compliance
is looming. Dig around in your pile of papers marked “must do something about this sometime” should
be a letter from HMRC explaining things. Benjamin Dyer, CEO of Powered Now, provides the lowdown.
MTD is an initiative from
HMRC designed to drag them-
selves (and us in the process)
into the current century. Like
most regulations, it is deeply
unpopular with both accountants
and businesses, apart from soft-
ware companies like my own,
that can scent opportunity.
The point of this article is
neither to agree, disagree or
challenge any of these views.
Rather, it’s to simply state the
facts and find pragmatic ways of
moving forward.
Making Tax Digital – the
need for an audit trail
The key change with MTD is
that businesses will need to keep
an electronic audit trail of what
they have submitted to HMRC.
Although this will start with VAT
only, in time it will roll out to
profit and loss returns and then
to every interaction with the tax
authorities.
Another way of putting it is
that communications with HMRC
will have to be justified with
electronic records that show
how any numbers submitted
were put together. This means
that everyone must have an
electronic record of sales and
costs, paper is no longer good
enough.
More than just VAT
HMRC have a rolling pro-
gramme for implementing MTD
that will run for several years
with many parts. Some small bits
have already been implement-
ed but the biggest so far will
be VAT. The following deadline
will involve every business
with annual sales over £10,000.
This includes sole traders, and
everyone will have to submit a
quarterly profit and loss return.
In the worst case, that’s just over
a year away although there may
be a delay. In contrast, HMRC
have currently paused MTD for
personal tax for now.
The deadline
The big pending deadline for
VAT registered installers is April
2019. For any VAT period starting
after that date you will need to sub-
mit your return through the MTD
service. The current web-based way
of submitting VAT returns will be
withdrawn. Remember the key new
requirement is that VAT returns
must be submitted to the electronic
MTD VAT portal. The VAT return
must be directly and electronically
calculated from a list of costs and
sales held on computer.
As you might expect, there are
some exceptions and some busi-
nesses do not have to comply with
MTD. But don’t get your hopes
up, either this is highly unlikely to
apply to you or there will only be
a brief reprieve.
exemptions will
‘ only
apply to a
tiny minority ’
The people who can perma-
nently dodge the bullet are those
that object on religious grounds.
However, before you dust off your
objections remember that you will
have to be a member of a religious
order that refuses the use of elec-
tronic devices, you must have reg-
ularly attended their services and
been generous with your dona-
tions. In other words, don’t bother.
You can also get an exemption if
no internet connection is available,
but I doubt if you operate your
installer business from a small
unpopulated island in the Scottish
Hebrides. It’s fair to say that these
exemptions will only apply to a
tiny minority.
There are also different rules for
companies with annual or month-
ly returns and one or more other
situations that won’t apply to in-
staller businesses. For these com-
panies, their deadline will be 6
months later on 1st October 2019.
HMRC say this comprises 3.5% of
VAT registered businesses.
Still little awareness
We’ve been trying to raise
awareness of MTD across the
trade industry but frankly it’s been
tough going. Few people running
trade businesses enjoy paperwork
and paperwork involving comput-
ers about tax must tick just about
every negative box in the book!
When you think about what
a big change MTD will bring to
the tax administration system, it
does seem incredible what a small
amount of press coverage there
has been. Maybe it’s another vic-
tim of our Brexit obsession?
There are now 100 businesses
joining the MTD for VAT pilot pro-
gram each day, up ten-fold in the
last few months. HMRC are over-
run with software companies trying
to get their solutions through
testing. Given all of this and the
fact that the deadline is so close, it
seems highly unlikley that this par-
ticular deadline will be put back.
HMRC have already spent a huge
fortune on the implementation and
are deeply committed. Several oth-
er countries have similar programs
that are several years ahead of the
UK and working well.
Despite all of this, many install-
ers still aren’t aware of MTD. A
survey by Xero even found that
25% of accountants hadn’t heard
of MTD a year or so back. In Pow-
ered Now’s survey of our custom-
ers, conducted mid 2018, only 15%
had heard of it.
The hit for installers
Many changes in legislation
cause costs for businesses and
MTD is unlikely to be different.
However, it does offer some sav-
ings in the medium term as it is
fundamentally easier and cheaper
to run a business on a computer
than from memory and bits of
paper. The initial learning curve
just has to be overcome first.
Every business that reports VAT
quarterly will need to comply
after April. People ignoring the
deadline will find themselves
with heavy fines although HMRC
have said that they will go easy
on companies that have tried
hard but are struggling with
MTD.