The UK tax authority has released draft regulations and a draft explanatory memorandum to introduce changes to the UK VAT regime.
The changes seek to require businesses with taxable turnover above the VAT registration threshold to keep and preserve digital records and provide VAT returns using compatible software effective April 1, 2019.
According to a news report by Tax-News.com, the changes are necessary to implement the Government’s proposed Making Tax Digital reforms.
It would be recalled that on July 31 this year, the Financial Secretary to the Treasury and Paymaster General announced that Making Tax Digital for VAT would come into effect from April 1, 2019.
The announcement indicated that from that date, businesses with a turnover above the VAT threshold (currently GBP85,000, or about USD112,500) would have to keep their records digitally (for VAT purposes only), and provide their VAT return information to HM Revenue and Customs (HMRC) through Making Tax Digital (MTD) functional compatible software.
MTD will be available on a voluntary basis to other businesses, for both VAT and income tax.
Similarly, the second draft of Finance Bill 2017, published on September 8, 2017, included legislation allowing the introduction of Making Tax Digital for VAT.
The legislation gave HMRC the powers to introduce these new regulations, which set out the detailed requirements that businesses will have to meet. They are The Value Added Tax (Amendment) Regulations 2018.
The HMRC has also released a draft VAT notice on what Making Tax Digital for tax-registered persons will involve.
