By Mark Jones, director of Carmarthen-based Clay Shaw Butler chartered accountants and business consultants.
The regulations to bring into force Making Tax Digital for VAT (MTDfV) are now law, and digital VAT returns will be required from 1 April 2019.
MTDfV is the first phase of HMRC’s landmark Making Tax Digital (MTD) regime, which will ultimately require taxpayers to move to a fully digital tax system.
Regulations have now been issued which set out the requirements for MTDfV.
Under the new rules, businesses with a turnover above the VAT threshold (currently £85,000) must keep digital records for VAT purposes and provide their VAT return information to HMRC using MTD functional compatible software.
The new rules have effect from 1 April 2019, where a taxpayer has a ‘prescribed accounting period’ which begins on that date, and otherwise from the first day of a taxpayer’s first prescribed accounting period beginning after 1 April 2019.
HMRC is piloting MTDfV during 2018, ahead of its introduction in April 2019.
Keeping digital records and making quarterly updates will not be mandatory for taxes other than VAT before April 2020, although businesses below the VAT threshold which have voluntarily registered for VAT can opt to join the scheme.
As with electronic VAT filing at present, there will be some exemptions from MTD for VAT.
However, the exemption categories are tightly-drawn and unlikely to be applicable to most VAT registered businesses.
Keeping digital records will not mean businesses are mandated to use digital invoices and receipts but the actual recording of supplies made and received must be digital.
It is likely that third party commercial software will be required.
Software will NOT be available from HMRC.
The use of spreadsheets will be allowed, but they will have to be combined with add-on software to meet HMRC’s requirements.
Meanwhile, from 1 April 2018, Land Transaction Tax (LTT) will replace Stamp Duty Land Tax (SDLT).
LTT will be collected by the Welsh Revenue Authority (WRA).
HMRC has published guidance on the introduction of the new tax and the way in which property transactions straddling 1 April 2018 and cross border transactions will be dealt with.
It is worth making a note of how property taxes work across the UK.
From 22 November 2017, there is an exemption for first-time buyers from SDLT on the first £300,000 when buying a home, where the total price of the property is not more than £500,000.
A total of 5% is payable on purchases between £300,000 and £500,000.
However, with devolved taxes, buying a property in Scotland and Wales can bring different tax consequences.
In Scotland, Land and Buildings Transaction Tax (LBTT) applies instead of SDLT.
Therefore an LBTT relief for first-time buyers of properties up to £175,000 has been proposed in the Scottish Draft Budget 2018/19. This is subject to a government consultation before the relief launches in 2018/19.
Welsh first-time buyers benefit from first-time buyers SDLT relief until 31 March 2018.
Land Transaction Tax (LTT) replaces SDLT in Wales from 1 April 2018.
The starting rate for LTT will be £180,000, benefiting not just first-time buyers but other home buyers in Wales.
A higher rate, of 3% over standard rates for additional residential properties, applies to purchases throughout the UK whether SDLT, LBTT or LTT applies.
A new land-transaction-tax-calculator is available.
HMRC has issued guidance on the changes in Wales and the transitional rules for property transactions.
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