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Are You Ready to Go Fully Digital with VAT?

Are You Ready to Go Fully Digital with VAT?
"""As a small business owner, you are aware that all VAT returns are currently digital and available online. You might not be aware, though, that HMRC has further ambitions. You will need to meet entirely new criteria in less than a year.

Beginning in April 2019, Phase One of the new Make Tax Digital procedure will be implemented. As a result, begin making plans now for the upcoming tax year.

Making Tax Digital: The Consequences

The government now plans to essentially mandate that you purchase or rent what they refer to as functionally compatible software, such as Clearbooks, in order to make all of your entries real-time. (Mac users, please be sure the solution you select will function in the UK.)

This might mean that you won't have to go over your paper records every quarter or year, but it also means that you (or whoever handles your accounting) will need to stay on top of all expenses and record them as they occur, in addition to, of course, invoicing.

According to claims made by small business advocacy groups, spreadsheets can still be used provided they are electronically linked to HMRC, however this is only meant to be a temporary solution and may not work in practice.

Initial VAT

The conversion of VAT records to digital, continuous reporting beginning in April 2019 is the first step in what is anticipated to be a full business tax transition by 2021.

Currently, the VAT Returns only include total sales and purchases. Every single item must be digitally recorded starting in April 2019 and must include the VAT element (zero-rate, standard-rate, etc.). You must also show any modifications you might make, such as reverse charges on imports, auto leases, subsistence, entertainment, etc.

There could be benefits and drawbacks:

Advantages:

Less physical paperwork and information collection/conversion using spreadsheets
preventing incorrect VAT recording and potential fines
Disadvantages:

Cost-additional cloud accounting software (for current non-users)
Continuous recording replaces quarterly or annual tasks, which may result in additional hours being charged by your accountant to ensure compliance.
Those impacted

Businesses must register for VAT if their annual sales exceed £85,000; if their sales are below that threshold but they anticipate exceeding it soon, they may choose to do so.

This includes limited firms as well as partnerships, sole proprietorships, governmental entities, non-profit organizations, and educational institutions.

It is also feasible that people who were considering joining but are currently below the threshold may choose to opt out of VAT registration instead. If you are unsure, we suggest having a conversation with us at Region Accountancy because there are arguments in favor and against and every circumstance is unique.

For the first 12 months, persons who are registered for VAT will enjoy a ""honeymoon period"" during which no penalty fees will be assessed. Small businesses without outside financial support undoubtedly need a period of acclimatization.

In the long run, organizations will be better off, according to HMRC's perspective, as other taxes are scheduled to go ""fully digital"" by 2021. As always, the devil will be in the details.

Let's have a discussion now so that you won't be surprised by the new guidelines and methods of operation.

Odiri tax consultants can be found at http://www.find-uk-accountant.co.uk/articles/107"""
 

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"Are You Ready to Go Fully Digital with VAT?" was written by Mary under the Business category. It has been read 34 times and generated 0 comments. The article was created on and updated on 16 November 2022.
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