The government have issued information on how Making Tax Digital for Business (MTDfB) is expected to work for VAT once the rules are introduced in April 2019.

Under the proposed rules, which have been issued subject to consultation, VAT registered businesses with turnover over the VAT registration threshold will be required to submit their VAT return digitally using software. Businesses with a turnover above the VAT threshold (currently £85,000) will have to:

• keep their records digitally (for VAT purposes only) and
• provide their VAT return information to HMRC through Making Tax Digital (MTD) functional compatible software.

This software will either be a software program or set of compatible software programs which can connect to HMRC systems via an Application Programming Interface (API). The functions of the compatible software include:

• keeping records in a specified digital form
• preserving digital records in a specified digital form
• creating a VAT return from the digital records and providing HMRC with this information digitally
• providing HMRC with VAT data on a voluntary basis and
• receiving information from HMRC via the API platform that the business has complied.

Businesses will need to preserve digital records in the software for up to six years. Further information on the required information can be found in Annex 1

The government will make the final detailed requirements available to the software providers by April 2018 to allow time for the software to be developed and tested prior to the rules coming into effect from April 2019.

VAT is the first tax to be reportable under MTD and businesses within the scope of MTD will need to keep their records digitally, using approved MTD functional compatible software, from 1 April 2019. The software will create the return from the digital records and this will need to be submitted under MTD for return periods starting on or after 1 April 2019.

We will keep you informed of developments in this area and ensure we are ready to deal with the new requirements. Please contact us for more information.

Internet link: GOV.UK MTD VAT legislation overview

The government are offering compensation to those who have been affected by problems with the implementation of Tax-Free Childcare.

Individuals who have been affected may be able to get a government top-up as a one-off payment for Tax-Free Childcare. The government will also consider refunding any reasonable costs directly caused by the service not working as it should, mistakes or unreasonable delays.

The government are advising that individuals may be eligible for these payments if they have:

• been unable to complete their application for Tax-Free Childcare
• been unable to access their childcare account
• not received a decision about whether they are eligible, without explanation, for more than 20 days.

Tax-Free Childcare is the new government scheme to help working parents with the cost of childcare. The scheme launched at the end of April and is being rolled out to parents, starting with those parents with the youngest children first.

For every £8 a parent pays in, the government will pay in an extra £2. Parents can receive up to £2,000 per child, per year, towards their childcare costs making a total amount of £10,000. Higher limits of £4,000 and £20,000 apply for disabled children.

To qualify for Tax-Free Childcare parents and partners in the household must generally meet a minimum income level of on average £120 a week and each earn less than £100,000 a year.

The scheme will be available for children up to the age of 12, or 17 for children with disabilities. All eligible parents will be able to join the scheme by the end of 2017. Those eligible will be able to apply for all their children at the same time although the government rollout will start with the youngest children first. Parents will need to open an online account, which they can use to pay for childcare from a registered provider.

For those employers who currently offer Employer Supported Childcare, usually in the form of childcare vouchers, these schemes can remain open to new entrants until April 2018. Existing members have the option to remain in their existing scheme or change over to Tax-Free childcare as their child becomes eligible. It is not possible to benefit from tax-free childcare and employer supported childcare at the same time.

A calculator for parents comparing the options and guidance on the other government provided childcare are available on GOV.UK.

Internet links: GOV.UK Childcare Service compensation Childcare calculator Childcare choices

HMRC have announced the introduction of a new online tax forum and webchat service for small businesses.

HMRC are advising that the new service called the Small Business Online Forum offers advice on tax matters as well as help with:

• starting a business
• support for growing a business – including taking on employees and expanding
• buying and selling abroad
• completing tax returns
• tax credits.

Please contact us for specific tailored advice on any of these matters.

Internet link: https://online.hmrc.gov.uk/webchatprod/community/forums/list.page

The Pensions Regulator (TPR) has begun carrying out employer spot checks to make sure employers are complying with their automatic enrolment duties and that they are giving their staff the workplace pensions they’re entitled to. According to the TPR these inspections help them to understand any challenges employers are facing, and whether TPR need to make any changes to their guidance. This also enables them to identify employers who fail to meet their duties, and take enforcement action where necessary.

TPR have confirmed that they will continue with their checks over the coming months generally sending a statutory notice to the employers they have selected ahead of their visits.

Get the process right

TPR are concerned that some employers are not following the correct procedures and during the course of their inspections have seen a number of instances of employers agreeing to opt staff out of a workplace pension before they have been enrolled. This is not in accordance with the auto enrolment rules.

According to TPR:

‘Some employers claimed they were unaware as to the formality of their duties or process they needed to follow, and had simply been trying to do their staff a favour by offering them the option of opting out up front. But whether their motivation was genuine, or whether they were simply trying to get out of paying their staff the pension contributions they were due, the result was the same – they were in breach of their legal duties. Eligible staff need to be enrolled first, and can then opt out. One of the cornerstones of automatic enrolment is capitalising on inertia, and it has proved very successful so far in helping people who might never have saved for retirement before.’

Please contact us for advice on auto enrolment.

Internet link: TPR Quarterly bulletin

Under pensions auto enrolment employers have to enrol qualifying employees into a workplace pension. Duties include paying contributions for the employee. The process of auto enrolment has been phased in from October 2012 when the largest employers had to comply with the rules. However the rules are set to change and new employers will have to comply with their automatic enrolment legal duties, as soon as they employ their first member of staff.

TPR guidance to advisers states:

‘If your client becomes an employer for the first time on or after 1 October 2017, they will immediately have legal duties for their new member of staff. These duties apply from the first day the first member of staff started working for your client. This is known as their duties start date.

Your client must comply with their duties straight away.’

In contrast to the above rule an employer who first pays an employee from 2 April 2017 onwards will have a staging date of January or February 2018 depending on when the first employee was paid.

Employers are generally able to postpone some of their auto enrolment duties for up to three months but this needs to be dealt with correctly.

Please contact us for help with auto enrolment.

Internet links: TPR guidance new employer from 1 October TPR new employer to 30 September