Ditch Paper Receipts – Digital VAT

WE ARE just not that great at paperwork! That’s what a poll of construction companies found, when HM Revenue and Customs  (HMRC) commissioned YouGov to do a survey, as the industry prepares for Making Tax Digital.

68% of senior decision makers in the construction industry have lost receipts and 15% have even lost a date’s phone number, according to the figures released today.

The poll also found, however, that 92% of senior decision makers personally bank online, 62% support all tax accounts being digitalised and one in four working in a small business are spending over 10 hours a week on administrative tasks.

Digital VAT

HMRC is introducing the Making Tax Digital (MTD) service for submitting VAT returns in the hope that it will reduce the number of hours spent on paperwork and cut down on paper bills.

Most businesses above the VAT threshold will need to keep their records digitally and submit their VAT return using compatible software when MTD is introduced for periods starting on or after 1 April 2019.

From October 2019, only client-facing construction companies at the top of the supply chain will charge VAT. Further down the supply chain, VAT will be calculated as a paper exercise and registered on the invoice as a ‘reverse charge’.

CIS

Companies registered with the Construction Industry Scheme (CIS) will fall into the reverse charge category of VAT collection. Those which aren’t CIS-registered must charge VAT.

Theresa Middleton, Director of the Making Tax Digital for Business Programme, said: “There is no change to ‘what’ information is provided through MTD, just ‘how’ it is recorded, generated and provided.

“We want to help businesses be ready for the changes which kick in for VAT periods which start on or after 1 April. We’ll have written to every business required to join this year by the end of February, but even back in December over 80% of them were aware of the changes they need to make and the vast majority of those are already preparing.”

What Businesses Need To Do

• Find out if your business is affected by the Making Tax Digital changes and what you need to do if it is. Most businesses above the VAT threshold have to start keeping their records digitally and sending their VAT return to HMRC direct from their software on or after 1 April.
• Talk to your accountant or other agent about how they are making returns Making Tax Digital compliant.
• Speak to your software provider if you already use software to ensure it will be compatible.
• Those businesses who are either not represented by an accountant and/or do not already use software will need to select software to use and sign-up to MTD. The GOV.UK webpages provide product information, from free software for businesses with more straightforward tax affairs, to sophisticated paid solutions. There are also products that can be used in conjunction with a spreadsheet for businesses that don’t want to change their underlying record keeping system.

Easy to use guides for businesses, agents and others including easy-to-follow advice are available here. Webinars and videos for Making Tax Digital are also available. 

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