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Making Tax Digital for VAT

The government have issued information on how Making Tax Digital for Business (MTDfB) is expected to work for VAT once the rules are introduced in April 2019.

Under the proposed rules, which have been issued subject to consultation, VAT registered businesses with turnover over the VAT registration threshold will be required to submit their VAT return digitally using software. Businesses with a turnover above the VAT threshold (currently £85,000) will have to:

  • keep their records digitally (for VAT purposes only) and
  • provide their VAT return information to HMRC through Making Tax Digital (MTD) functional compatible software.

This software will either be a software program or set of compatible software programs which can connect to HMRC systems via an Application Programming Interface (API). The functions of the compatible software include:

  • keeping records in a specified digital form
  • preserving digital records in a specified digital form
  • creating a VAT return from the digital records and providing HMRC with this information digitally
  • providing HMRC with VAT data on a voluntary basis and
  • receiving information from HMRC via the API platform that the business has complied.

Businesses will need to preserve digital records in the software for up to six years. Further information on the required information can be found in Annex 1.

The government will make the final detailed requirements available to the software providers by April 2018 to allow time for the software to be developed and tested prior to the rules coming into effect from April 2019.

VAT is the first tax to be reportable under MTD and businesses within the scope of MTD will need to keep their records digitally, using approved MTD functional compatible software, from 1 April 2019. The software will create the return from the digital records and this will need to be submitted under MTD for return periods starting on or after 1 April 2019.

We will keep you informed of developments in this area and ensure we are ready to deal with the new requirements. Please contact us for more information.

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Budget highlights – March 2013

– Personal allowance increased to £9,440 for the year 2013/14, and a further increase to £10,000 in 2014/15.

– A £2,000 Employment Allowance for businesses and charities to set against their employer national insurance contributions from April 2014.

–  The small profits rate of CT will remain at 20% from April 2013, the main rate of CT will be unified by April 2015, providing a single rate of CT of 20%.

– Annual Investment Allowance limit increased from £25,000 to £250,000 for a two year time period for all qualifying investments in plant and machinery made on or after 1st January 2013.

– CGT annual exemption  currently £10,600, wil rise to £10,900 for 2013/14, £11,000 for 2014/15 and £11,100 for 2015/16.

– The VAT registration threshold will rise from £77,000 to £79,000 and the deregistration threshold will increase from £75,000 to £77.000, both from 1 April 2013.

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Proposal for SME records checks by HMRC

HM Revenue & Customs has driven ahead with a ‘Pilot Scheme’ for HMRC records checks. Although there were assurances that there would be no ‘live’ action on SME Records Reviews, warning letters have been issued to a number of pilot cases.

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Tax Agents and HMRC – Proposed review

We are currently studying the detail,  with a view to responding to a Survey of Members in practice by ICAS. Basically, we welcome the acknowledgement by HM Revenue & Customs of the vital role played by professional tax advisers such as this firm in assisting taxpayers to comply with tax law and administrative requirements.

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Staff update July 2011

We are delighted to welcome Alistair Bryson, a school leaver, to the accountancy and business tax services team. Alistair will be contributing to the team at Clement and Co as a trainee accountant, initially working towards an AAT qualification. Then training to qualify for membership of ACCA will be the next step.

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