By Alan Gregory | March 12, 2019 | 4 minutes of reading

Although there has been much discussion about whether the launch of the Digital Taxation VAT project would be delayed, there are no signs of the initiative slowing down.

This means that the vast majority of VAT registered businesses will need to comply with Making Tax Digital for VAT for VAT periods commencing on or after 1 April 2019, although some entities, such as unincorporated not-for-profit organizations companies and businesses with VAT requirements will not be mandatory to comply with Making Tax Digital for VAT before October 1, 2019.

As a result, accounting firms have only a few months to prepare their clients for the changes to VAT reporting that Making Tax Digital will bring.

Below we describe how IRIS has implemented solutions to help your practice prepare for this new digital regime.

If your customers meet the VAT digitalization criteria

VAT registered businesses with a taxable turnover above the VAT registration threshold (currently £85,000) will need to comply with Making Tax Digital for VAT.

In short, this means that affected businesses will need to store digital VAT records and file digital VAT returns to HMRC using software compatible with the Making Tax Digital platform.

For accounting firms whose clients fall within the Making Tax Digital for VAT remit, we have a range of tax software and accounting solutions so you can file your clients’ VAT returns digitally with HMRC.

All of our tax and VAT reporting products have been recognized by HMRC as being compatible with Making Tax Digital for VAT and offer integrated reporting solutions which should ensure ease of reporting under the new regime.

If your customers are below the digital VAT threshold

Not all businesses will be required to comply with Making Tax Digital for VAT. Specifically, businesses that are VAT registered but whose taxable turnover is below the VAT registration threshold can continue to file their VAT returns online as usual, although such businesses may choose to join the Making Tax Digital scheme for VAT if they wish.

As not all businesses will be affected by Making Tax Digital for VAT, there will be a disconnect between accounting firms’ clients as some clients will be required to comply with Making Tax Digital for VAT while others will not. will not be.

Businesses will therefore need to decide how best to file their customers’ VAT returns, taking into account the different reporting requirements their customers may be subject to. In general, companies can choose to approach this mismatch in one of two ways.

First, accounting practices may choose to take a piecemeal approach to reporting. This would involve filing VAT returns for customers outside of Making Tax Digital’s scope for VAT in the same way as they have done before, while still filing VAT returns for those customers within Making Tax Digital for VAT using our links to compatible software as shown above. .

However, if businesses want a solution that allows them to file all of their clients’ VAT returns from one place, whether or not that client falls under the Making Tax Digital regime for VAT, there is another answer.

Specifically, IRIS will provide a transition solution to VT Software, an accounting software provider that allows VAT return data to be exported to transition software so that it can be lodged with HMRC. This means that all customers’ VAT returns can be filed in one place, eliminating the stress of filing different VAT returns on different platforms.

Prepare your clients to make tax digital

As the digitalization of taxation for VAT represents one of the biggest changes to VAT reporting in recent years, the earlier your practice can be prepared, the better.

The first step is to take the time to review your existing customer list and identify those who will fall within the scope of tax digitization for VAT, as this will help your business communicate with these customers on upcoming changes to their VAT declaration and registration. comply with the requirements.

Additionally, it will also allow your firm to understand how many clients will need to comply with Making Tax Digital for VAT, and how many clients will not need to move to the new regime. This will then give you the opportunity to decide which VAT reporting solution is best for your practice.

Learn more about Making Tax Digital and the latest updates on our insights page.

If you need further information on your customers’ VAT reporting options in the “Making Tax Digital for VAT” section, please do not hesitate to ask a member of the IRIS team for advice. You can also take a look at our new tax and accounting software for a different cloud solution.