August 2018

tax tips & finance e-newsletter

In this issue

Making Tax Digital for VAT Guidance Issued
Rules for “Rent a Room” Relief to be tightened up from 6 April 2019
CGT on Property Sales due within 30 days from 2020
Ask Alexa to contact HMRC for Help
Augmented Reality Tech
Innovation - One Step at a Time
Exam Success

Making Tax Digital for VAT Guidance Issued

HMRC have now issued their detailed guidance on the digital record keeping and return requirements for Making Tax Digital (MTD) for VAT.

VAT Notice 700/22 clarifies that spreadsheets may still be used to keep business records provided that there is bridging software that links to the Government gateway.

There will however be a one year “grace” period during the first year of MTD when businesses will not be required to have digital links between software programs, referred to in the VAT Notice as a “soft landing”.

The VAT notice includes a number of helpful examples illustrating different accounting systems and the digital links required to comply with MTD for VAT.

The VAT notice is essential reading for all VAT registered businesses. 

https://www.gov.uk/government/publications/vat-notice-70022-making-tax-digital-for-vat

When does MTD for VAT start? 

The Making Tax Digital rules apply from your first VAT period starting on or after 1 April 2019. A ‘VAT period’ is the inclusive dates covered by your VAT Return.

For example, where a business submits quarterly returns covering the periods to 28 February, 31 May, 31 August and 30 November, the business will need to comply with Making Tax Digital rules for the VAT quarter starting 1 June 2019 and ending on 31 August.

 

'Soft Landing' for MTD for VAT for the First Year 

For the first year of MTD for VAT (VAT periods commencing between 1 April 2019 and 31 March 2020) businesses will not be required to have digital links between software programs. The one exception to this is where data is transferred, following preparation of the information required for the VAT Return, to another product (for example, a bridging product) that is Application Programme Interface (API) - enabled solely for the purpose of submitting the 9 Box VAT Return data to HMRC. The transfer of data to this product must be digital.

For the first year of MTD for VAT (VAT periods commencing between 1 April 2019 and 31 March 2020), where a digital link has not been established between software programs, HMRC will accept the use of cut and paste as being a digital link for these VAT periods.

However, for VAT periods starting on or after 1 April 2020, there must be a digital link for any transfer or exchange of data between software programs, products or applications used as functional compatible software.

Use of Spreadsheets in preparing VAT Returns

Example 3 in the VAT Notice describes a business that uses a spreadsheet and bridging software from April 2019, which allows the information to be transferred to HMRC via an API. It uses a spreadsheet to record all sales, purchases, and expenses in a digital format. The VAT Return is then prepared within the spreadsheet, using formulae already written into the spreadsheet.

The VAT Return information is then sent via a mandatory digital link to bridging software, which digitally submits the information directly to HMRC. Example 6 shows how a spreadsheet would be acceptable in order to consolidate VAT information prior to submitting a Group VAT return.

Whilst spreadsheets will continue to be permissible it is unclear at this point how bridging software will work. In most cases our preferred system is Xero Bookkeeping Software

If you haven’t already done so, please contact us to help you get ready for this significant change in VAT accounting and reporting.

Rules for “Rent a Room” Relief to be tightened up from 6 April 2019

HMRC propose to restrict the availability of “rent a room” relief to situations where the taxpayer is living in the let property for at least some of the time that the accommodation is let.

Hence renting out a house during Wimbledon fortnight while the owners are absent would not qualify from 6 April 2019!

Rent-a-room relief was introduced in 1992 to encourage individuals to make spare capacity in their homes available for rent. The government intended this to increase the quantity and variety of low-cost rented accommodation, giving more choice to tenants and making it easier for people to move around the country for work.

Currently rent-a-room relief gives relief from income tax for up to £7,500 of gross rental income to individuals who let furnished accommodation in their only or main residence.

CGT on Property Sales due within 30 days from 2020

Draft legislation in the next Finance Bill will introduce significant changes to the reporting of residential property disposals and the payment of CGT from 6 April 2020.

Currently non-UK resident taxpayers disposing of UK residential property are required to report the disposal to HMRC within 30 days. The new legislation extends this reporting obligation to UK resident taxpayers and at the same time will introduce a new payment on account regime.

This is yet another attack on buy to let landlords who currently pay CGT on property disposals on 31 January following the end of the tax year in which the disposal took place so this change will be a significant acceleration of the payment date.

  

Ask Alexa to contact HMRC for Help

HMRC has launched new and innovative technology to help more than 3 million customers renew their tax credits.

HMRC has developed a customer-focused service through Amazon Alexa specifically for those seeking help with their tax credits renewals.

Customers with Amazon Alexa-enabled devices can ask Alexa to ‘open HMRC’ and ask for help and information with a change of circumstances, payment information, or a renewal.

No personal information is stored on Alexa and customers cannot renew their tax credits using Alexa.

It’s just one part of HMRC’s growing online services. Tech-savvy customers can also use the HMRC App on their smartphone to: 

  • renew their tax credits
  • check their tax credits payments schedule
  • find out how much they have earned for the year

Augmented Reality Tech

Along with artificial intelligence (AI) and facial recognition, Augmented Reality (AR) is one of the big technology trends this year.

Mobile point of sale, using a smart-phone or tablet to take payment for goods and services, is now pretty well established. AR is the next step on from this.

AR technology broke through to the mainstream a couple of years ago thanks to the popularity of Pokemon Go. The popular game allowed users to utilise the camera on their phone to interact with Pokemon characters at different geographical locations.

Another good example is Ikea’s new app which uses AR technology to allow users to take a photo of a room, then place Ikea furniture onto the image. This allows potential customers to “try before they buy” in a virtual manner, so that they can see if the furniture matches the design of their room.

Some businesses have gone one step further and they are using AR technology to activate apps on your smart-phone when you are nearby.

For example – if you are walking past a bicycle rental kiosk, the app will pop up and ask you if you want to rent a bicycle.

We are starting to see a new wave of innovative solutions being developed as a result of AR technology becoming more mainstream. This will give businesses a new way to interact with customers and could help you to create new delivery models for your products and services.

Innovation - One Step at a Time

Innovation in business doesn’t necessarily mean you have to make great leaps forward. Sometimes little steps can be just as transformative.

Innovation doesn’t necessarily have to involve massive change programmes and unsustainable levels of activity. Not every business needs a revolution.

Your business doesn’t necessarily need to be the next Google. What if you introduce a number of smaller innovations over a 12-18 month period that makes it easier for your customers to buy from you? Perhaps you could create a faster and more efficient way of getting your product to your customer.

Maybe you can learn from other industries in order to apply new processes that are innovative for your particular industry. For example - if delivering your products or services directly to your customer, any time of the day is unheard of in your particular industry, you and your firm could be the “innovator” in your sector of the market, by being the first firm to offer this type of service.

Innovation doesn’t necessary have to involve technology. You could improve the quality of your service offering by investing in training and developing your people. Perhaps you could be the first firm in your particular market to provide Lean Six Sigma training to your staff. This training could equip your people with a mind-set to find better, more efficient ways of doing things in your business. This would have the effective of reducing waste (whether that is time, raw materials, energy or money). In addition it could deliver efficiencies to your customers in terms of reduced lead times, etc.

The key to driving innovation in your business is to step back, look at your firm in the context of your particular industry and consider if there is a better way of doing certain things. It also helps to talk to some of your customers. They will tend to be pretty quick to tell you what they want and what would make them buy from you again, rather than from a competitor.

Exam Success

We are pleased to announce that Marco Belim has passed the final exams to achieve his Tax Technician Qualification and become a member of ATT, the leading professional body for those providing UK tax compliance services.

Marco joined Humphrey & Co as an Apprentice Accounting Technician in 2015 and achieved his AAT qualification in 2017. Whilst working for Partner Greg Penfold in the Dental Team Marco will now continue with his studies working towards achieving his ACA qualification to become a Chartered Accountant.

We congratulate Marco on his hard work in achieving this qualification and wish him every success with his ACA studies.