The end of March/beginning of April sees some huge changes
The end of March/beginning of April sees some huge changes including the introduction of MTD for VAT, the new Agent Services Account and Brexit (to name just three!) plus the changes to pensions’ regulations, which you can read here.
HMRC are issuing dozens of links daily to cover all eventualities for MTD and Brexit and some of the most useful for ICB members are listed below.
Note: Remember, you can sign up for HMRC daily updates yourself but be very careful what you sign up to as you may be inundated. In addition, with the outcome of the vote in Parliament on 13 March, the links for Brexit have been removed from this article).
MTD for VAT
By the time the next ICB newsletter goes out in April, MTD will be alive and running (hopefully seamlessly!). HMRC have been issuing a huge amount of links to various updated documents and advice and most of these are listed below.
Remember - mandated MTD VAT returns are only for those businesses whose turnover is over the VAT registration threshold, and who are not exempt. Those under the threshold and voluntarily registered for VAT can continue with the existing system.
Unless part of the pilot scheme, the first mandated return must be made for the first VAT quarter that starts on or after 1 April 2019. So if a VAT quarter runs from (say) February to April, then the first VAT quarter under MTD will start on 1 May and run to the end of July.
There is quite a lot of publicity around at present that currently only 30,000 businesses have signed up to MTD with a further 1.17 million businesses still to register. However, it is important to understand that when moving over to the MTD system for VAT, it is vital to complete the process for submitting the last VAT return under the existing system first and to leave it for a period of 5 days for everything to clear, before registering under MTD.
Those signing up for MTD must ensure they allow a period of 15 days between sign up and the deadline for the first return. Note: although HMRC are providing a ‘soft landing’ for MTD returns before the full penalty system kicks in, it is vital to understand that even if the first VAT submission under MTD is not completely successful then the due VAT must still be paid by the existing deadline otherwise an automatic penalty will be imposed exactly as it is now.
HMRC have updated the VAT Notice 700/22 to cover exemptions from MTD and included an outline of the process for application. The relevant part of the Notice is Section 3. We have also included some examples of businesses who are exempt. I’d like to thank those who worked with us to ensure this guidance was as helpful as possible for businesses and agents.
HMRC has also been working on their VAT sign-up advice for businesses and agents and have produced two simple step-by-step guides as a result:
Agent Step by Step Guide
Business Step by Step Guide
There are some further updated links available to assist with signing up as a tax agent for MTD, which we have incorporated into the ICB MTD Hub, which you can find here.
Note also that HMRC are repeating their extremely useful webinars on both MTD and the Tax Agent Services sign up, all of which are detailed in our article listing all webinars here.
Software companies have been working to ensure compliance and compatibility and if you want to use intermediary software via a spreadsheet, then there are packages to allow that also. The latest list of suitable software is available on the gov.uk website here and the latest version allows you to filter your query and select the type of software (e.g. bridging).
On 19 February, HMRC issued its latest ‘awareness’ report. 500 businesses were targeted between November and December 2018, of whom 80% stated they were aware of MTD either by name or concept with 9 of 10 VAT-mandated businesses reporting using digital record keeping for their business. The most common way that VAT-mandated businesses had heard about MTD was through a tax agent or accountant. You can read more about this here.
This section of the update was originally included as HMRC have been issuing links to helpful documents in the even of a no-deal Brexit. However, in the light of the vote in Parliament on 13 March, it has been decided not to issue any of the links. If the situation changes, ICB will notify you of how you can find these.
Agent Update No. 70
HMRC issued its bi-monthly Agent Update (No 70) at the end of February. The update now contains a new section on EU Exit
In the tax section, there is a highlight on the repayments for a Post Graduate Loan (PGL). The earliest date when individuals can start repayment of PGL is April 2019 and this will be repaid concurrently with any undergraduate student loans. The threshold for PGL for England and Wales will be £21,000, with deductions being taken at 6%. The new Starter Checklist now includes a question for PGL.
A reminder that this April will see the start of increased pension contributions for employers and their staff. The total minimum contribution will rise from 5% total to 8%. Finally, there is a notice concerning Scottish and Welsh residents who have amended tax codes and may pay a different rate of income tax to anyone residing in England or Northern Ireland.
There is also a reminder that the National Minimum Wage increases on 1 April.
Making Tax Digital – This section provides an update on the VAT Pilot scheme and also how to register your tax agent details under the new system.
You can find the full agent update here.