Making Tax Digital – a transition towards digitisation

What is Making Tax Digital? An HMRC initiative for the UK tax system and ultimately bring an end to Self – Assessment. MTD is a Tax Revolution in the UK. The MTD’s aim is primarily to make Tax administration, a fully digitalized tax system by 2020. Its primary objective is to make the tax system “Effective, Efficient and Easier”. The Secondary objective is to make MTD as a Cost Cutting measure, and finally to cut down the overheads for HMRC for managing Tax affairs. MTD would bring changes in the tax system which will apply to a wide range of taxpayers, including most businesses, self-employed professionals, and landlords. Here comes the challenge where the businesses would now get their records to be digitized and further it requires a Cloud Integration. Making Tax Digital timeline: From April 2019, quarterly reporting is: Mandatory for VAT for all registered businesses with a turnover above the VAT registration threshold (£85,000 per annum) Optional for VAT – registered businesses with a turnover below the VAT registration threshold  From April 2020, quarterly reporting is: Mandatory of income tax and corporate tax (as appropriate) for all businesses (including landlords) with a turnover over the VAT registration threshold (£85,000) Three Steps to going Digital: 1. Digital Records Storing all Transactions in electronic form Cloud Accounting AR and AP data stored in electronic format 2. Digital Link A Digital Link is an electronic or Digital transfer or exchange of data between software programs, products or applications. The use of ‘Cut and Paste’ does not constitute a digital link VAT account – Audit Trial No Human intervention 3. Digital...
VAT – Getting Started

VAT – Getting Started

VAT is an often misunderstood tax and clients often ask questions about it. Hopefully this post will dispel some of the myths and make clear how it works. What is VAT? VAT is Value Added Tax. It is a tax that’s charged on most goods and services that registered businesses provide in the UK. For the purposes of this post we won’t explore the complexities when trading outside of the UK but we are happy to advise on this if you use the Contact Us link. Who charges VAT? VAT can only be charged by a registered business. A registered business is an individual, a partnership, a company, club, association or charity. If your turnover is below the threshold then you do not have to register but you can voluntarily decide to register if it is to the benefit of your business. Once your turnover is over the threshold (currently £85,000 per year) you must register. How much is VAT? There are three rates: standard – 20% reduced – 5% zero – 0% Goods and services charged at a standard, reduced or zero rate are ‘taxable supplies’. Even though a zero rated item doesn’t have VAT charged on it it is still a taxable supply at a rate of zero. Most goods are standard rates. The reduced rate applies to children’s car seats, domestic supplies of fuel and power and products to help with quitting smoking. A zero rate is applied to most basic food items, books and magazines, children’s clothing and shoes, and travel by public transport. Rates on different goods and services – GOV.UK – via www.hmrc.gov.uk...

VAT Fraud gang 

Three men jailed for 13 years for their part in a multi-million pound fuel and VAT fraud have been ordered to pay back almost £6.9 million or face more time behind bars. Senior citizen Michael Wilmot, 73, led the Lincolnshire gang that was jailed in July 2014 after an investigation by HM Revenue and Customs (HMRC) found they had evaded millions in duty and tax through a sophisticated fraud. Wilmot, transport manager Michael Taylor, 39, and HGV driver Derek Blackburn, 61, all from Market Rasen, appeared at Hull Crown Court where the confiscation orders were granted. David Cowie, Assistant Director, Fraud Investigation Service, HMRC, said: “Our investigations do not stop at sentencing. It is crucial we look to stop criminals profiting from their crimes and reclaim as much as possible to put it back where it belongs – funding vital public services across the UK. “This criminal gang were put behind bars for stealing millions of pounds. Now they must pay back what they owe otherwise they will be spending more years in prison.” Wilmot used connections to a farmers’ buying consortium in Louth to order large quantities of rebated fuel, commonly known as red diesel. Unknown to the consortium, the fuel was sold on and used illegally in heavy goods vehicles (HGV) belonging to 35 different companies, all with connections to Wilmot. In an extension of the fraud, Wilmot played his part in issuing invoices for the haulage work carried out by the companies, charging customers VAT on their services. But instead of paying the VAT to HMRC, he pocketed the cash. In addition, none of the companies...

Should I register for VAT?

Many small business owners ask whether they should register for VAT and this post aims to clarify when you should register and also address some pros and cons of voluntary registration. Mandatory VAT registration Legally, you must register for VAT if your turnover in the previous 12 months (not your last financial year but a rolling 12 months) has exceeded £82,000 (as at the time of writing) or if you know that you will exceed this threshold. If you have a bookkeeper then they will know whether you have exceeded this and will be able to advise on registration. This registration is mandatory and if you fail to register in time HMRC can make you pay the VAT on sales from the time you should have registered – potentially a costly error. Bear in mind that this figure is turnover and not profit, so is the amount of all of your sales before taking off any costs. Voluntary VAT registration A business with a turnover of less than the threshold can still choose to register for VAT voluntarily but this is a decision with consequences and a decision should not be taken lightly. If you choose to register voluntarily and later decide that this is the wrong decision then you can deregister at any time as long as your turnover remains under the threshold. Any bookkeeper or accountant will be able to talk to you about your own business and the implications of voluntary registration but I will lay out a few pros and cons very briefly here. Pros The ability to reclaim VAT on VATable purchases such as...

VAT (De)Registration Thresholds

With effect from 1st April 2015 the VAT registration threshold has been increased from £81,000 to £82,000 and the deregistration threshold has also been increased by £1,000 from £79,000 to £80,000. Bear in mind though that the calculation to see if the threshold is a rolling 12 month one so figures need to be reviewed regularly. If you think or know that you are near or over the threshold please speak to a professional for advice. Bruton Young Bookkeeping would be delighted to assess your turnover, register you if necessary and then carry out your VAT administration on an ongoing basis.   Share this:Click to share on Twitter (Opens in new window)Click to share on Google+ (Opens in new window)Click to share on Skype (Opens in new window)Click to share on WhatsApp (Opens in new window)Click to email this to a friend (Opens in new window)Click to share on Pinterest (Opens in new window)Click to share on Pocket (Opens in new window)Click to share on Facebook (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to print (Opens in new...