people at computer
Making Tax Digital for VAT: organisations are under prepared
Robert Marchant, Partner, Corporate VAT
21/09/2018
people at computer

At our recent webinar held by Crowe’s VAT partners Robert Warne and Robert Marchant to over 600 people in organisations of varying sizes, we discussed what they need to do to prepare for the significant changes required to submit VAT returns from
1 April 2018.

Robert Marchant

Our webinar audience was asked about their readiness for Making Tax Digital to comply with the new rules:


  • 61% are yet to have meaningful contact with their accounting system provider about the changes
  • 73% have either not started or are just starting to review steps
  • 26% felt the complexity of their existing VAT compliance processes were cause for concern.
Watch the webinar
It is striking that with less than six months to go before the new rules take effect there are still a significant number of organisations that are either unaware of these changes, or are still in the early phases of assessing what steps they  need to take to be compliant.

Organisations should not underestimate the time that will be required in order to change their VAT processes, particularly given that
there is a technology aspect. We are anticipating a significant amount of activity between now and the end of the year.

Robert Marchant , Head of Corporate VAT

How can we help?

We are working closely with a number of organisations to help them review their VAT compliance processes and to identify the changes that are compulsory for 1 April 2019. For further information, please speak to your usual Crowe contact or VAT@crowe.co.uk

Top ten webinar questions      

1. Do I fall within Making Tax Digital (MTD)?  

If you are registered for VAT because you have, at some point in the past, exceeded the £85,000 taxable turnover threshold, then yes you will fall within MTD.

2. What information will be submitted to HMRC?
For now it is only the 9 VAT return numbers that are to be provided as part of the submission process. However, in the future we expect the MTD requirements to be expanded so that summary data, and potentially even transaction level data, is provided alongside the 9 VAT return boxes.
3. What does API mean?
API means ‘Application Programming Interface’ and is a way for one piece of software to directly link with another piece of software without human intervention. For MTD it will allow software or an Excel spreadsheet to submit the 9 VAT return numbers directly to HMRC.
4. We are partly exempt from VAT, how will our adjustment be made under MTD?
Most organisations use a spreadsheet to calculate partial exemption and business / non-business methods as the accounting systems do not accommodate these apportionment calculations. From 1 April 2019 you will be compliant if you include your partial exempt and business / non-business adjustments in the digital / system records by way of an adjusting journal that is linked to your spreadsheet. Alternatively, you could use the spreadsheet to directly upload the VAT return figures to HMRC using API software.
5. What happens if you are on a retail apportionment scheme?
If you account for VAT using a retail scheme you must keep a digital record of your Daily Gross Takings (DGT). You are not required to keep a separate record of the supplies that make up your DGT within functional compatible software.
6. What is a digital link?
A digital link is where one piece of software communicates to another without human intervention. An example of a digital link within Excel is when a formula references another cell in another tab or workbook. An excel report from your accounts system would also count as a digital link.
7. What data must be kept digitally?

 You must have a digital record of:

  • your business name
  • the address of your principal place of business
  • your VAT registration number
  • any VAT accounting schemes that you use.

For each supply you make or receive you must record the:

  • time of supply (tax point)
  • value of the supply (net value excluding VAT)
  • rate of VAT charged.
8. I’m not registered for VAT, but I reclaim VAT using a form VAT126. Is this part of MTD?
If you are not currently registered for VAT and are not required to be registered for VAT then you will not fall within MTD. If you are not sure if you are required to be registered for VAT, please contact a member of the Crowe VAT team.
9. Can I use a spreadsheet?
Yes, providing digital links are maintained with your accounts software and the spreadsheet itself is API enabled to submit the VAT return to HMRC. If you don’t have accounts software and are only using a spreadsheet, you will need to ensure all the records are recorded in an MTD-compliant format.
10. My software provider is on HMRC’s list of MTD-compliant providers, do I need to do anything?
While your software may be MTD-compliant, it is equally important to ensure that your internal processes are also MTD-compliant (i.e. if you export your data to excel to prepare the VAT return, are digital links being maintained). If you are unsure if your processes are MTD-compliant, then please contact a member of the Crowe VAT team.

  

Contact us

Robert Marchant
Robert Marchant
Partner, VAT
London