Agenda Introductions Making Tax Digital Scope & application Timeline original proposals vs ministerial announcement The impact of MTD & VAT Finance Bill 2017-19 How businesses can prepare Software Pilot Customer participation Q& A 2
Introductions Michael Cameron HMRC Transformation Programme Making Tax Digital for Business Kim Hau EMEA Indirect Tax Proposition Manager Customer Readiness & External Stakeholder team Michael has been working in the Civil Service since 1978 and for HMRC since January 1984. He has worked on various programmes such as the introduction of Self Assessment, managing the transition to the year 2000 (I2K) and the Carter Programme (SA Online Filing and VAT Online Filing). Michael is now in an HMRC Transformation role and is working with a wide range of business customers to explain HMRC s digital plans. Kim has been at Thomson Reuters since July 2016 developing GTM strategies for the core ONESOURCE Indirect Tax products. Prior to this, Kim has worked in-house in a VAT advisory capacity for a number of financial institutions and insurance companies for over 12 years. Kim has represented these organisations at the BBA, ABI and participated in a working group to lobby the UK government regarding the separation of banking divisions. 3
MAKING TAX DIGITAL Scope & application Timeline 4
Aims & Objective Better Use of Information Real-time Access One Complete Picture Digital Interaction with Customers most digitally advanced tax administration in the world
Making Tax Digital Four main threads 1. Digital Tax Accounts Self serve of tax affairs 2. Agent Access To the Digital Tax Account data 3. Digital Recordkeeping and Quarterly reporting for businesses and landlords 4. HMRC better use of third party data API strategy 6
Making Tax Digital Status Four main threads 1. Digital Tax Accounts Self serve of tax affairs 2. Agent Access To the Digital Tax Account No Change Exist today No Change Pilot progressing 3. Digital Recordkeeping and Quarterly reporting for businesses and landlords Deferred 4. HMRC better use of third party data No Change Pilot progressing 7
Timeline: Original Proposals April 2018 April 2019 April 2020 Income Tax unincorporated traders and landlords (above VAT registration threshold) Income Tax unincorporated traders and landlords (below VAT registration threshold but over 10,000) VAT all registered businesses CT all registered businesses 8
Ministerial Announcement 13 July 2017 April 2018 April 2019 April 2020 Income Tax unincorporated traders and landlords (above VAT registration threshold) Income Tax unincorporated traders and landlords (below VAT registration threshold but over 10,000) VAT all registered businesses (above VAT threshold)? CT all registered businesses 9
Summary What Has Actually Changed? Quarterly Reporting for Income Tax earliest mandation will be April 2020 Voluntary for those below the VAT registration threshold Quarterly Reporting for VAT no major changes from previously announced Voluntary for those below the VAT registration threshold Quarterly Reporting for CT no major changes from previously announced Voluntary for those below the VAT registration threshold Importantly, it is still going to happen! Re-introduced in recent Finance Bill 10
THE IMPACT OF MTD & VAT Finance Bill 2017-19 How businesses can prepare 11
Finance Bill March 2017: Measures to introduce Making Tax Digital via the Finance Bill were scrapped in Autumn Budget 2017: This will now be introduced after the Autumn Budget announcement (expected 22 November 2017) - Changes to come into effect from April 2019 - Legislating for policies already announced 12
VAT : Finance Bill 2017-19, clause 62 Changes to Schedule 11 VATA 1994 (administration, collection and enforcement) Include Digital reporting and record keeping requirement for VAT registered businesses Provide by electronic communications to HMRC Keep records in electronic form Includes the submission of information as well as the making of returns - suggests additional data required to supplement the VAT return? - What would be the additional data? Detail of Digital Record Keeping (format, etc) to be introduced by Regulation by April 2018 Effective Date = 1 April 2019 (earliest) to be confirmed by Regulation 13
What do the VAT changes mean? (i) Records to be kept are broadly the same as what is required from the VAT return: VAT Account : Output VAT Payable vs Input VAT Recoverable Details of any special VAT accounting schemes used Adjustments or error corrections Data from Sales and Purchase records Boxes 1 VAT due on sales and other outputs 2 VAT due on acquisitions from other member states 3 Box 1 + Box 2 4 VAT reclaimed on purchases and other inputs (ii) Submission deadlines remain the same (iii) Method of submission changes for most VAT payers Use of functional compatible software 5 Box 3 Box 4 6 Total value of sales and other outputs (exc. VAT) 7 Total value of purchases and other inputs (exc. VAT) 8 Total value of supplies to other member states 9 Total value of acquisitions from other member states 14
What do the VAT changes mean? (iv) Penalty for failure to comply is the same Same as failure to comply with normal record keeping requirements (v) Record retention digitally is also six years prospective not retrospective EXEMPTIONS Digital Record Keeping does not apply to everyone If in the preceding year, value of taxable supplies in month before the current month is less than the VAT threshold, and Person not subject to requirements in previous month = EXEMPT Persons who genuinely cannot use digital tools 15
Other changes: Finance Bill 2017-19 Income Tax Applicable to traders and property landlords (UK and overseas income) No implementation date Statutory Instrument No indication of thresholds Statutory Instrument Partnerships Excluded activities Nominated Partner responsibilities 16
How can businesses prepare? April 2018 April 2019 April 2020 Income Tax unincorporated traders and landlords (above VAT registration threshold) Income Tax unincorporated traders and landlords (below VAT registration threshold but over 10,000) VAT all registered businesses (above VAT threshold)? CT all registered businesses 17
VAT registered businesses VAT Population Total = 2,217,840 Source: HMRC VAT Factsheet 28 October 2016 Incorporated Sole Trader Partnership Other 18
VAT registered businesses 1,200,000 1,000,000 Voluntary April 2019 By Turnover Mandatory April 2019 800,000 600,000 400,000 200,000 - Turnover 0-83k 83k - 150k 150k - 300k 300k - 500k 500k - 1m Over 1m HMRC VAT Factsheet 28 October 2016 19
VAT registered businesses Businesses by Turnover Voluntary April 2020 Mandatory April 2019 HMRC VAT Factsheet 28 October 2016 Below 83k Above 83k 20
POLL QUESTION How do you submit your UK VAT return for your organisation? A : Manually via online portal B : Use of third party software tool C : Outsource to third party provider, e.g. accounting firm D : Other 21
How can Businesses prepare? Assess all VAT registered legal entities or businesses and current UK VAT submission methods - software being used to submit? - portal upload? Assess need to move towards the use of a functional compatible software to maintain VAT records and VAT submission digitally - impact assessment to internal business processes and systems - project plan to ensure readiness by April 2019 22
SOFTWARE PILOT 23
VAT PILOT Technical Beta end of October 2017 Private Beta April 2018 Public Beta June 2018 24
VAT PILOT Minimum Viable Product (MVP) what does that mean? Limited to What is being delivered? Who can be supported? What process restrictions we might have? 25
VAT PILOT Available Software Vendors consuming our API Good response from Industry We are working on issues with existing API products Dependent on available software 26
VAT PILOT How Can you get Involved You Need Software You need Clients willing to volunteer They need to ensure they are keeping Digital Records 27