More time for Making Tax Digital
You may have heard back in October that HMRC are extending the initial soft landing period for the Making Tax Digital (MTD) VAT rules. However, only some businesses may qualify for this extension, so it’s important to check to make sure you fit the bill before putting it off.
What are the MTD rules?
The MTD rules for VAT are that any transfer or exchange of data between software programs, products or applications has to be done digitally rather than manually on paper. You will be required to keep digital VAT business records and send returns using MTD compatible software.
A soft landing period of one year was applied on 1st April 2019, ending on 1st April 2020. If you are eligible for an extension, you won’t have to have your digital links in place until 1st October 2020.
Why is an extension being offered?
Since April, many businesses and professional bodies have come forward and contacted HMRC with concerns that the time limit of one year might not be enough in industries that use complex software.
Problems have been reported from companies within the hotel industry, veterinary services and education sector – to name only a few.
How likely are you to get an extension?
HMRC have stated that they will review applications for extensions on a case by case basis, and businesses will only receive an extension if they agree that it’s needed. They have been quite clear that cost alone will not be sufficient grounds, mentioning that extensions will only be granted in ’exceptional circumstances’.
You can view the specifics of the VAT Notice here.
What should you do?
If you think that your business will benefit from an extension, you should first look at the details contained within the VAT notice and consider whether you will meet the criteria outlined by HMRC.
If you believe you satisfy this criteria, the VAT Notice contains the exact details of what an application should contain. An application must be submitted before the end of the soft landing period on 1st April 2020. We recommend that you submit as soon as possible, due to the amount of information you are required to include, which must then be processed by HMRC.
If you’re concerned about the impact of MTD rules on your business and would like to talk through the process, feel free to get in contact with us.