Making Tax Digital for Business Presentation to the CIPFA VAT Committee 1 March 2018

What is Making Tax Digital? Capturing all transactions in record-keeping software: as near to real time as possible on any device (pc, smartphone, tablet etc.) Summary updates via API* enabled software Application Programming Interface

How is MTD VAT different What will be different: VAT returns compiled by pulling data from digital records VAT returns sent to HMRC via API-enabled products and not through VAT portal What remains the same: 9 Box VAT return VAT return frequency and payment deadlines Eligibility for VAT Special Schemes Public bodies submitting additional information required by HM Treasury for reclaiming VAT.

Timeline for VAT February 2018 April 2018 From April 2019 Technical consultation closed – 9 February 2108 Regulations made – 28 February 2018 April 2018 VAT pilot – Live testing of MTD begins From April 2019 Businesses trading above the VAT threshold are mandated to use MTD

MTD VAT Secondary Legislation Consultation The VAT Secondary Consultation closed on 9 February 2018 and the government received 60 responses Businesses leaving MTD can consider alternative methods of preserving their records rather than having to keep them in a specified MTD format. We have also relaxed requirements for digitally recording information for supplies made or received where: property owners receive data from letting agents; there is difficulty in identifying and splitting the tax value on each supply, for example multiple supplies within a single retail offer; and, the amount of partial input tax claimable on each partial exemption is not known at the time of purchase.

VAT Pilot Starts in April 2018 Agent can act on behalf of their client Simplest businesses first More complex businesses join as pilot grows Must have compatible software to take part Software development and testing Publish more information

Digital record keeping Using MTD compatible software to: Keep digital records spreadsheets calculate the return submit it to HMRC via an API

‘Functional Compatible Software’ Program, or set of compatible programs, that must: Keep digital records Provide HMRC information and returns using the APIs Receive information from HMRC If a set of programs are used, there must be a digital link between the pieces of software

Data transfers and adjustments HMRC anticipates that there will be a soft landing period (April 2019 – April 2020) without application of record-keeping penalties, during which this digital link is not mandatory. This will allow businesses extra time to update their systems to be fully compliant. VAT Group member 1 (XML) VAT Group member 2 (Spreadsheet) VAT Group member 3 (XML) Digital link Spreadsheets Mandatory digital link Bridging/ Linking software API VAT return submitted to HMRC The mandatory digital record keeping requirements will be maintained by each member of the VAT Group. A spreadsheet (or a series of spreadsheets) will be used to collate figures of all members of the group. This does not always have to be a VAT group, this may also apply to large organisation operating multiple systems e.g. Local authorities

Data transfers and adjustments Digital records maintained in non API enabled software Mandatory Digital Link Agent/Auditor’s API enabled software API VAT return submitted to HMRC NB. Agents/Internal Control may have access to their client’s software. Adjustment by manual intervention This could range from correcting mistakes to adjustments required by VAT law. These interventions could also take place within the confines of a single software product. Any correction of mistakes must be made by the agent back into the client’s digital records. Adjustments

What we mean by ‘Soft landing’ Links between packages/interfaces must be digital. But… For a short period (HMRC has proposed one year) more time to update legacy systems won’t apply record-keeping penalties in certain circumstances