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VAT Making Tax Digital – A Giant Step

Growing confidence

It’s official. Sole traders and companies with up-to-date VAT affairs are now able to join HMRC’s test phase for VAT Making Tax Digital (MTD). While testing of VAT-MTD started last April, until now it has been on a limited, controlled, invitation-only basis.

In what can be taken as a clear indication of the department’s confidence, the VAT MTD pilot has now been opened to accept everyone.

New guidance

In support of the public test phase, a suite of new and updated guidance is available to help VAT-registered businesses and their agents get to grips with the new requirements.

The newly published guidance covers:

  • Use of software to submit VAT returns. A guide outlining how to sign up a business for the MTD-VAT pilot and how to join.
  • For agents: use of software to submit VAT returns. A guide outlining how an agent and their clients can sign up for the MTD-VAT pilot.
  • Find software suppliers for sending VAT returns and Income Tax updates. This lists third-party HMRC-recognised software packages that support the Income Tax and VAT-MTD pilots.

HMRC has also published a series of videos on its Help and Support page:

  • How to sign up for Making Tax Digital for VAT.
  • How does Making Tax Digital for VAT affect you?
  • Making Tax Digital for VAT – what software is compatible?
  • Digital record-keeping for VAT.
  • Creating an Agent Service Account.

Can everyone join?

As of last month, provided they haven’t incurred a default surcharge in the last two years, just over 40% of the approximate 1.1 million VAT-registered entities, who are required to keep digital records and file MTD-compliant VAT returns from April next year, will be able to apply to onboard early.

A further 100,000 will be able to join the public pilot by the end of this month.

Those who can’t join

There’s a small but significant list of VAT registered entities who yet remain unable to join the pilot. These include those who:

  • trade with the EU;
  • are based overseas;
  • submit VAT returns annually;
  • make payments on accounts;
  • use the flat rate scheme;
  • are newly registered and have not yet filed a return;
  • are members of VAT groups or VAT divisions;
  • have received a Default Surcharge notice in the last 24 months. However, they will be allowed in by the end of this month;
  • are unincorporated not-for profit organisations;
  • are trusts;
  • are Local Authorities who complete VAT form 21;
  • Public Corporations;

Timetable

To help them plan, HMRC has published a timetable indicating when each of the embargoed cohorts will be able to join the pilot.

3.5% to get a deferral

HMRC has reported that 3.5% of those mandated will not be able to onboard before the end of December.

This cohort will have their mandation date pushed back to October 2019.

Those affected include:

  • VAT groups or VAT divisions.
  • Overseas traders registered for VAT.
  • Trusts.
  • Local Authorities.
  • Public Corporations.

All of those in the deferral group will be written to by HMRC.

What is Making Tax Digital?

Making Tax Digital is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and to keep on top of their affairs. This will ultimately result, for millions of people, in the end of the annual tax return.

As the first stage of a wider roll-out process, VAT-registered businesses with VAT-able turnover above the compulsory £85,000 registration threshold will be mandated to join the VAT Making Tax Digital for Business regime. To meet their VAT return obligations, this will apply to all return periods commencing April 2019.

As a minimum, they will be required to maintain their VAT records digitally and to file MTD-compliant VAT returns using third party software. Those mandated to join will no longer be able to log on to HMRC’s portal to complete and file their online return.

Those businesses who voluntarily registered for VAT, with a VAT-able turnover under £85,000, will not be required to use the system, although they can choose to do so voluntarily.

Confused?

Contact us if you’re confused about what MTD will mean for your business. We’re here to help.

Helping businesses and individuals prepare for a ‘No Deal’ Brexit

The government has issued notices that aim to help both businesses and individuals prepare in the event of a UK-EU agreement not being realized. The notices cover passports and driving licenses, together with data protection and mobile phone roaming charges. With concerns surrounding the possibility, on 29 March 2019, of the UK leaving the EU without a deal, a survey by the Federation of Small Businesses (FSB) has revealed:

  • 14% of small businesses have started planning for a No Deal Brexit. Another 41% believe that a No Deal Brexit will have an impact on their business but have not yet started planning for the possibility.
  • 10% believe that a No Deal Brexit will have a positive impact on their business. 48% believe a No Deal scenario will have a negative effect.

Reflecting on the research, FSB National Chairman, Mike Cherry, stated:

“It is obvious that our small firms are not prepared or ready for a chaotic no deal Brexit and the impact that it will have on their businesses. If you sell your products to the EU, buy goods from the EU or if your business relies on staff from the EU, you now see this outcome as a clear and present threat to your business.”

To see the FSB survey press release visit here.

It’s coming.

It’s coming whether we like it or not. But don’t worry! We can help you navigate your way through the uncertainty that is Brexit.

Self-employed Class 2 National Insurance remains

The government has decided not to abolish Class 2 National Insurance Contributions (NICs) from April 2019. This is today paid at a rate of £2.95 per week by self-employed individuals with profits of £6,205 or more annually.

Robert Jenrick, Exchequer Secretary to the Treasury stated, “We delayed the implementation of this policy in November to consider concerns relating to the impact on self-employed individuals with low profits. We have since engaged with interested parties to explore the issue and further options for addressing any unintended consequences.”

He added, “Having listened to those likely to be affected by this change, we have concluded that it would not be right to proceed during this parliament, given the negative impacts it could have on some of the lowest earning in our society.”

Guidance on recognising phishing emails and texts

The guidance has been updated on how businesses and individuals should recognise whether contact from HMRC is genuine or whether it is phishing or fake.

Five Steps to a Successful Business Strategy

When setting out on a new venture or business idea, so many businesses do not succeed. This could be down to a combination of factors. Yet, one common factor is the challenges associated with executing the idea and establishing it in the market.

To ensure your idea or business has the best start, or if you are reviewing current plans and progress, you must first develop an effective business strategy to support you. To help, here are five steps to guide you.

 

  • Build up your data and knowledge

 

 

To know where you want to go is first to understand where you are today. The best way to do this is to investigate the past. This could be through data from your market, so you understand the size of the opportunity at stake. Investigate the total market size, the number of potential customers, and the growth rates of similar projects. Using the SWOT framework helps you identify Strengths, Weaknesses, Opportunities, and Threats, both internally and externally.

You might want to use the PESTLE model to explore deeper into external factors that may affect your business. This looks into the Political, Economic, Social, Technological, Legal, and Environmental aspects of your business and market. It is key to make sure you involve the right people in this process to help you build up your data and knowledge.

Once you understand the market, begin to narrow down your idea, exploring the unique business problem you are looking to solve, and the market opportunity associated to it.

 

    1. Build Your Vision and Mission Statement

 

Your vision should be used to describe the future direction of the business and its aims in the medium to long term. It’s about describing your organisation’s purpose and values. This should be built in parallel to your mission statement, which defines the organisation’s purpose and outlines its primary objectives.

In simple terms, organisations summarise their goals and objectives in mission and vision statements. These serve different purposes but are often confused with each other. While a mission statement describes what a company wants to do now, a vision statement outlines what a company wants to be in the future.

The mission statement focuses on what needs to be done in the short term to realise the long-term vision. So, for the vision statement, you are asking where do you want to be in three to five years’ time. The mission statement, alternatively, asks: what do we do? how do we do it? for whom do we do it? what value do we bring?

Examples:

Amazon’s Corporate Vision Statement: “To be Earth’s most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online.”

Google’s Corporate Mission Statement: “To organize the world’s information and make it universally accessible and useful.”

 

    1. Define your Strategy and Tactical Plans

 

At this stage, the aim is to develop a set of high-level objectives for all areas of the business. These need to highlight the priorities and inform the plans that will ensure delivery of the company’s vision and mission. By reviewing your work in step one across the SWOT and PESTLE analyses, you can layer these into your SMART Objectives (Specific, Measurable, Achievable, Realistic and Time-related).

Your objectives must also include factors such as KPI’s, resource allocation, and budget requirements. It is key to align your resources and structure according to the strategy, so to clarify everyone’s role and accountability.

 

    1. Track and Manage Performance

 

All the planning and hard work may have been done, but it’s vital to review continuously all objectives and action plans – to ensure you’re still on track to achieve that overall goal. Managing and monitoring a whole strategy is a complex task, which is why many directors, managers and business leaders are looking to alternative methods of handling strategies. Creating, managing and reviewing a strategy requires you to capture the relevant information, break down large chunks of information, plan, prioritise, and have a clear strategic vision.

 

    1. Execute, Learn and Review

 

Firstly, execute your business strategy with excellence and, throughout, capture learning so that it can be reapplied or used to adjust the plan if necessary. Do not be afraid to make mistakes, but make sure each mistake is an opportunity to apply learning to the strategy. Executing at the highest level is key: anyone can have a good idea, but those who can execute make a lesser idea into a successful business.

Remember always to celebrate your team and business successes. It can be quite easy to get dragged into the here-and-now and forget to reflect on the great achievements of the organisation.

A daunting prospect

If after reading our article, you feel daunted by what you need to do, don’t worry. We are here to help you every step of the way. Simply give us a call and we will guide you through the challenging start-up maze.