Making Tax Digital for VAT comes into force this time next year for businesses with a turnover above the VAT threshold, are you and your clients ready for the change?
According to HM Treasury there are around 1.2 million businesses with a turnover above the VAT threshold of £85k and approximately 1 million voluntarily VAT registered businesses. Additionally there are around 3.5 million business not having to register for VAT as their turnover is below the threshold.
The UK threshold of £85k is the highest in the EU and more than double the average in the EU which is around £29k.
At the autumn 2017 budget the chancellor announced that the government was not minded to reduce the threshold and confirmed that it would remain at £85k for 2 years from April 2018. Instead they would consult on whether the design of the threshold could better incentivise growth. This means that there is a good chance that the threshold or the rules around the threshold will change in April 2020.
The government has begun the consultation with a call for evidence; there are 22 questions to answer which can be found here and responses can be made either by email to email@example.com or by completing an online survey here. The consultation closes on 5th June 2018 so if you feel that this could impact you and your clients, now is the time to get involved and have your say.
At IRIS, we recently conducted a VAT survey with our customer base and found that more than 97% of accountants that responded to the survey said that they currently complete VAT returns on behalf of their clients. The majority of respondents said that they complete VAT returns for approximately 20% to 30% of the client base and 76% of respondents said that they currently use the HMRC’s online service.
HMRC’s free VAT online filing service will not be updated for Making Tax Digital, so this service will not be available to any business with a turnover above the VAT threshold from April 2019. Now is the time to start talking to your clients about what their options are so that you are both prepared for the upcoming changes.