9:48 am, January 21, 2019
DEALERS are being urged to ensure they are compliant with the government’s new Making Tax Digital service.
The initiative aims to bring an end to the tax return and a transformed tax system by 2020, and as part of it, from April 1, 2019, all VAT-registered businesses with a taxable turnover above the VAT threshold (£85,000) must keep their VAT business records digitally and send their VAT returns using Making Tax Digital-compatible software. This means that dealers will no longer be able to manually type in the VAT return figures into the HMRC system, as they must be submitted digitally.
From the April 2019 deadline, any software that prepares a VAT return to send to HMRC for businesses must use Making Tax Digital (MTD) and be MTD-compatible to integrate with HMRC systems for VAT submissions.
Data must be exchanged digitally between all software used by a dealer for VAT, as HMRC’s goal is to eliminate paper-based processes and manual data entry errors in reporting VAT figures. The usual HMRC deadlines for sending VAT returns and making payments will not be changing. MTD doesn’t require dealers to keep any extra business records, but business records must be kept digitally to be compliant.
Mark Kelland
Mark Kelland, commercial manager of software specialist Dragon2000, said: ‘We have been in regular communication with the HMRC MTD development team on all things Making Tax Digital since 2017, so we have a good grip on what will be required by car dealers.
‘Provided that those accountants or book-keepers working on behalf of dealers have registered as a tax agent with the HMRC to submit returns and are using MTD-compatible accounting software, then dealers will comply, as long as their records are kept digitally.
‘There are some exceptions for a small minority with more complex tax requirements, who will have the start date deferred for six months. We have seen articles in the media recently advising dealers that ‘‘many dealerships will be classed as complex’’ and will have a little longer to prepare.
“However, this only applies to categories of businesses that are trusts, ‘‘not for profit’’ organisations that are not set up as a company, VAT divisions, VAT groups, public sector entities required to provide additional information on their VAT return – for example, government departments and NHS trusts – local authorities, public corporations, traders based overseas, those required to make payments on account and annual accounting scheme users.
‘Dealers should not be fooled into thinking because they use the Margin VAT scheme, this makes their business ‘‘complex’’ and they can avoid the changes until October 2019. The reality is that with MTD beginning in April 2019, dealers do need to act now if they do not have any accounting software in place or a dealer management system to record transactions digitally.’
He added: ‘If dealers have older accounting software that isn’t MTD-compliant, don’t have an accountant that submits VAT returns on their behalf, or don’t have any digital accounting software in place at all, they will need some help. Dragon2000 is offering a Making Tax Digital package to help dealers to comply fully in time for the deadline, particularly if they aren’t using a dealer management system, which is the first step in complying with digital record-keeping rules.
‘Dealers who are DragonDMS users and use our comprehensive integration into Sage 50c for their accounting will not need to do anything for the impending Making Tax Digital deadline.’
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