With six months to go until the new digital VAT regime goes live, HMRC has launched a major communications campaign to try and build awareness amongst small businesses affected by Making Tax Digital.
Aside from providing clarity around the thorny issue of spreadsheets, the lack of education or guidance from HMRC has been the biggest complaint coming from the profession, and vendors and professional bodies have hailed the move as a step in the right direction.
However, questions raised at events and webinars show that there is still a huge knowledge gap, even within the accountancy profession itself. Yesterday the ICAEW published research that showed over 40% of businesses that will be affected by MTD for VAT are not yet aware of it, despite the April 2019 deadline for its introduction.
The campaign started yesterday with a tweet linking to a webpage entitled Making Tax Digital: how VAT businesses and other VAT entities can get ready.
AccountingWEB understands that HMRC is planning to increase its social media and public relations activity around MTD, and will also send a direct mail to all affected businesses. No dates have been set for this activity.
An HMRC spokesperson said: “We are starting to ramp up communication activity with businesses, initially with information to help them prepare for MTD and later how they can sign-up for the service."
The page itself does not contain any previously unreleased information but simplifies the current guidance on how businesses should prepare for MTD for VAT.
The webpage spells out the criteria for businesses that will be mandated to join the scheme (registered for VAT with a taxable turnover above the VAT registration threshold), but also encourages businesses with a turnover below the VAT threshold to sign up voluntarily “so they can also benefit from MTD”.
It also contains information on the MTD for VAT pilot, which is currently available only to invited volunteer businesses and their agents but will be open to a wider audience at a later date.
Spreadsheets and bridging software
According to the guidance, spreadsheets can be used to calculate or summarise VAT transactions to arrive at the return information needed to send to HMRC.
“If you use spreadsheets to keep business records, you’ll need MTD-compatible software so that you can send HMRC your VAT returns and receive information back from HMRC,” states the guidance. “The information must not be physically re-typed into another software package.”
It goes on to state that bridging software may be required to make spreadsheets MTD-compatible. Bridging software is HMRC’s term for a digital tool that can take information from other applications, for example, a spreadsheet or in-house record keeping system, and allows the user to send the required information digitally to HMRC in the correct format.
31 March 2020 deadline
Businesses will, according to the guidance, be given until 31 March 2020 to make sure there are digital links between their software products. Before that date, cut and paste will be an acceptable way to transfer information.
The exception to this is where return information is to be transferred to a software product enabled for an Application Programming Interface (an API provides a secure link between software and HMRC) and designed to submit the 9-box VAT return (such as bridging software). In those circumstances, the transfer of information must only be digital.
HMRC has confirmed it will publish details of the available VAT products later this year when the private pilot becomes a public one, but a list of software companies currently working with HMRC to produce compatible VAT software is available on GOV.UK.
The tax authority is currently working with more than 150 software vendors that have said they’ll provide software for Making Tax Digital for VAT in time for April 2019, and more than 40 of these suppliers have or will have software ready during the first phase of the pilot.
One of the approved vendors on HMRC’s list is UK-based SaaS provider Clear Books, and their MTD project lead and CFO David Carr told AccountingWEB that the release of the webpage was a “great step” in raising small business awareness of MTD.
“The information on it isn't anything new, but it's in a shorter, more readable format, making it easy to understand,” said Carr. “Clear Books is receiving hundreds of inbound enquiries a week from the .gov website, so it's clear the message is getting through to small businesses”.
About Tom Herbert
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