VAT Soft Landing Period Ends 1^st April 2021

Changes to Making Tax Digital commenced on 1^st April 2019. This is a requirement for businesses to keep digital VAT records. From this date until 31^st March 2021 the VAT office allowed a transition period for businesses to put these digital links in place. This means that all parts of there are accounting software need to be connected together.

Have you now got this in place? If not, you do need to act before the 31^st March. The system has to be one that the VAT office will accept.

The new rule has the force of law:

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’ or ‘copy and paste’ does not constitute a digital link. There is an exception during the soft-landing period as set out in paragraph 3 of the next ‘force of law’.

For VAT periods starting on or after 1 April 2021 your systems must use digital links. This is required for any transfer or exchange of data between software programs, products or applications used as functional compatible software. This is stipulated in the legislation.

Therefore, VAT quarters from 30^th June onwards must have a digital means of transfer.

Changes to Making Tax Digital- What does this mean for me.

If you currently use an excel spreadsheet for submission, this is still an acceptable method of submission. If you are providing your accountant with a transaction list in any other format such as:

• Handwritten paper
• Pdf’s
• Word processing documents
• Verbal

This is no longer acceptable. The information must be provided in a digital spreadsheet.

You will need to either start using a spreadsheet to record the data. Or better still implement a full digital bookkeeping system that records all your transactions.

This latter option will give your business more flexibility. This will also mean that when the next stage of MTD is implemented you will be ready to go with accounts data submission.

How we can help

We can offer clients reduced price licenses on digital software like

• QuickBooks
• Xero
• Sage online

We can help you set up the system.

We can provide training

Or even complete the book-keeping for you.

Let us know what you prefer, and we will provide a quote.

If you are not yet ready to go to full digital records, then you will need to look at maintaining a Microsoft Excel spreadsheet which we can supply to you. This spreadsheet will link to our online system for submission of the return data. If you would like a copy of the spreadsheet please send us an email.

The full details on the legislation can be found https://www.gov.uk/government/publications/vat-notice-70022-making-tax-digital-for-vat/vat-notice-70022-making-tax-digital-for-vat

For more details please contact us on 01942322767 or email info@mcgintydemack.co.uk

Pay VAT Deferred Due To COVID 19- What you need to know.

A lot of businesses will have taken up the option given by the government to defer VAT that was due between 20^th March 2020 and 30^th June 2020.

The time to pay this deferred amount is almost arrived but you do have options to consider that may help your current cashflow and financial position.

A new VAT deferral payment scheme will open on the 23^rd February offering businesses extra help to meet the liabilities that are coming due.

Dates Open

The new scheme is open from 23^rd February to 21^st June and lets you:

• Pay your deferred VAT in equal instalments interest free
• Choose the number of instalments from 2-11.

Pay VAT Deferred Due To COVID 19-How Do I Apply?

• You must join the scheme yourself we as your agent cannot do this for you
• Obviously you have to have a liability that is due for the above deferred period
• Be up to date with your current VAT returns
• Join the scheme by 21 June 2021
• Pay the first instalment when you join
• Pay your instalments by preferably direct debit

How Long Can I Pay Over?

The date you join the scheme dictates how long the payments can be over:

The sooner you join the more flexibility you have.

If you join this scheme it does not stop you having other time to pay arrangements for other HMRC debts

How Do I Join The Scheme?

Ideally you should do this online through your Government Gateway account.

• Create or log into your gateway
• Make sure there are no outstanding returns from the last 4 years
• Ensure any errors if any exist are corrected
• Make an application online

If you want to join the new scheme but cannot use the online service then you can contact the COVID helpline when the scheme opens on 0800 024 1222.

Pay VAT Deferred Due To COVID 19- Act Now

Your options on the VAT you owe are:

• Pay the deferred VAT in full on or before 31 March 2021
• Join the new VAT deferral scheme

If you do not take up one of the above options, then you may face interest or penalties.

Full details are available https://www.gov.uk/guidance/deferral-of-vat-payments-due-to-coronavirus-covid-19

If you need clarification on any of the above points either in confirming the new scheme will be applicable to you or help in getting old returns up to date please contact us ; info@mcgintydemack.co.uk or call 01942 322767.

You can find more information about VAT here

New Rules VAT Reverse Charge

The VAT Reverse Charge New Rules 2021 for sub-contractors and building contractors will soon take effect. From 1st March 2021, the VAT reverse charge will change how you have typically been accounting for VAT. How you layout information on your invoices to clients and prepare your VAT returns may change.

The VAT Reverse Charge New Rules 2021 – What is it?

It is where the supplier of construction services does not account for VAT, but the end-client does. The reverse charge means the customer receiving construction services must pay the VAT to HMRC, opposed to the company supplying the service. The end-user will have to recover VAT subject to the standard HMRC procedures.

How will the new rules be applied?

From 1st March 2021, these VAT Reverse Charge New Rules 2021 apply to standard rate VAT or reduced-rate construction services provided by VAT registered companies. If the supplies of service are zero-rated, the reverse charge will not apply. Suppose you or your business don’t make an onward supply of construction services. In that case, you are the end customer, and standard VAT rules are applicable.

If your invoices have CIS and non-CIS registered materials, the new reverse charge will apply to the entire invoice total.

What do you do if you are a sub-contractor?

If you’re invoicing a customer (or contractor) in a supply chain. In that case, you’ll either have to apply the reverse charge or charge VAT as usual. If it’s the reverse charge, the total of your invoice will not include VAT.

The invoice has to state to your contractor or customer that the reverse charge rules have been applied, showing the total amount of output VAT applied (20% if it’s the standard rate of VAT). Your contractor or customer will then need to include that amount on their VAT return. You don’t have to include the reverse charge on your VAT return.

What do you do if you are the main contractor?

If you are the main contractor receiving a VAT reverse charge invoice from a sub-contractor, you should continue to record it as an ordinary expenses invoice and include the input VAT on your next VAT return.

HMRC Guidance https://www.gov.uk/guidance/how-to-use-the-vat-reverse-charge-if-you-supply-building-and-construction-services

We have created a standard invoice template so you are able to visualise what your invoice should look like under the new rules. To download please click here

You’ll also have to account for the reverse charge VAT that your sub-contractor has informed you about. The overall effect on your VAT liability will be neutral as the input VAT covers the output VAT.

If you believe the new reverse charge VAT rules apply to your business, contact us today, we’re here to help you every step of the way. Email us at info@mcgintydemack.co.uk or call 01942322767