Emma Chesson, Kreston Reeves, asks: are residential developers ready for the April VAT deadline?
Soon, all residential developers that file VAT returns will have no choice but to file those returns online and through dedicated accountancy software. The move is part of the Government’s Making Tax Digital programme, and the sector is far from ready.
From April this year, the 2.55 million VAT registered businesses with a turnover exceeding the £85,000 VAT threshold will be required to file VAT returns through Making Tax Digital compliant software and not via the current HMRC portal.
The move will require developers and their contractors, or their advisers, to use Making Tax Digital compliant software, such as QuickBooks, Xero or Sage.
Lack of preparation
We at Kreston Reeves have been talking to our developer clients about the HMRC’s Making Tax Digital programme and the April deadline, and it is clear that the Government’s promotion and communication to support this move is not working as well as hoped. The sector is just not prepared for this move.
Research conducted by Kreston Reeves with 530 businesses in the second half of 2018 suggested that just 65% of businesses understand and are prepared for the changes, with just over half (53%) of the businesses surveyed using Making Tax Digital compliant software. A worrying 27% of businesses do not think their finance teams are ready for the Making Tax Digital deadline, and 19% having not heard of Making Tax Digital at all, leaving themselves at risk.
The good news is that most accountancy firms are up to speed with the Government’s Making Tax Digital programme and are already using fully compliant software. If you are unsure whether your accountant is fully Making Tax Digital compliant, then ask.
If your business manages VAT returns directly, look for information and resources from your software provider. They too are up to speed with the Making Tax Digital programme and are already increasing their communications and support around this.
The residential development sector has a lot to manage this year, with the UK’s exit from the European Union coinciding with the first Making Tax Digital VAT deadline. HMRC assures us that is ready for the Making Tax Digital deadline but has said it will be accompanied by a soft landing, meaning that businesses are unlikely to penalised. That is not, however, an excuse for failing to prepare or for the late filing of VAT returns.
To help clients, we have provided the following quick guide:
- If your turnover exceeds the VAT threshold of £85,000 you will no longer be able to file your VAT returns via the HMRC portal. They will need to be filed via Making Tax Digital compliant software.
- Current providers of Making Tax Digital compliant software include QuickBooks, Xero, Sage and Twinfield.
- The information VAT returns need to include is not changing.
- Talk to your accountant and make sure they fully understand the Making Tax Digital regime, and…
- Do not leave until April.