17 December 2018

MTD for VAT….Is the rural sector ready?

Businesses in the rural sector are struggling with HMRC's MTD regulations, here are the actions you need to take

It has been widely reported that businesses in the rural sector are struggling with HMRC's MTD regulations which come into force from 1st April 2019. Time is beginning to run out for businesses to make the changes that are required.

The following notes will remind (or inform) you of the actions you need to take:

What is MTD?

Making tax digital (MTD) regulations require affected businesses to record all business transactions in a digital format. Paper records will no longer be sufficient or in some cases acceptable. 

Businesses will require to have specially adapted software to submit VAT return information directly to HMRC from 1 April 2019.  Penalties apply if VAT returns and payments owing to HMRC are not made by the appropriate due dates.

Does it apply to my  business?

MTD applies to all businesses that are required to be registered for VAT. That is all businesses with turnover of £85,000 or more. If this applies to you, you must be able to submit your VAT returns digitally by 1st. April 2019 using MTD compliant software.

Can I get out of it?

There are some exemptions for businesses that are not able to engage digitally for religious reasons or because of disability, age or location (e.g. no broadband). HMRC has not provided clear guidance or criteria for these exemptions. If you think one of these exemptions could apply to you please get in touch. We would be happy to help you confirm your MTD eligibility with HMRC.

Deadline extension for some businesses

Businesses registered for VAT as a VAT group do not need to be MTD compliant until 1st October 2019.  If you think this applies to your business contact us and we will confirm your MTD “go-live” date.

Whatever your “go-live” date here’s what you need to do now:

If your VAT records are held on paper

If your business records are currently held on paper you will need to move them to digital record-keeping. We strongly recommend that you move to an MTD compliant accounting software package. Software providers such as Xero, Sage and Farmplan are all promoting MTD compliant versions of their software. We can help you find the one which is best suited for your business.

If this is a step too far, don't worry!  Software suppliers have developed bridging software that would allow you to use Excel spreadsheets to record your VAT transactions and transmit your VAT return information to HMRC in an MTD compliant format.

We are here to support you with this process, just get in touch if you need any help.

If you already record your transactions using accounting software

If you already use accounting software to record your VAT transactions you should contact your software supplier to check that the version you use is MTD compliant. HMRC has produced a list of MTD compliant software suppliers and we have replicated that here

If your software is compliant you need to ensure that your existing VAT processes and procedures are correct and work with the new MTD software. We can help you with this by double checking your VAT position is correct and follows current VAT procedures.

You may see this as an opportunity to get rid of a system that is holding you back and move to updated digital software that suits your business and provides reliable information to allow you to make wider business decisions.  Contact us if you would like us to suggest suppliers that offer MTD complaint solutions.

Do you currently make manual adjustments on your VAT return?

Many rural businesses are subject to VAT partial exemption rules. Partial exemption calculations are not regarded as digital records and they can still be performed outwith an MTD compliant software package.  Adjustments still need to be made to the final VAT return before it is submitted to HMRC. 

If you would prefer to digitise this process contact us  - we are currently considering and reviewing software that can perform these tasks.  If you want to discuss this in more detail just contact us

Finally don't worry! There will be a solution for every business but you should consider this now so that you can budget for any additional costs and work in the New Year!

Please contact a member of our specialist VAT team if you have any questions.

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