VAT News

Making Tax Digital – It’s systems not just VAT


In January 2017, we saw HMRC publish its response to the 6 consultation papers which outlined in August 2016 their approach to the subject. Three new pieces of draft primary legislation have been published and the closing date for comments on these is the 28 February.

Changes that have been noted from the original consultation include:

  • Allowing businesses to continue to use spreadsheets for record keeping
  • Dropping the requirement to make and store invoices and receipts digitally
  • Removing the requirement for Charities BUT NOT Trading subsidiaries, to keep digital records
  • To pilot digital record keeping and quarterly reporting updates for the full year from April 2017
  • Taxpayers will be given at least 12 months before they face late submission penalties and there will be further consultation on late payment penalty interest.

The relative lack of information regarding VAT accounting processes is still a concern and we hope to get some clarification at our meeting with Ed Troup of HMRC on 22 March in Cardiff, specifically to discuss the progress of their Making Tax Digital Agenda.

It's important to consider these plans not just in the light of HMRC’s desire to move to a more digital interface with taxpayers and their tax reporting, but also to reflect on two other factors:

  • The aim to reduce the VAT revenue gap in the UK and
  • The impact of plans emanating from the EU to improve accuracy of reporting of VAT across all member states and particularly in respect of cross border trade

One of the 20 measures to tackle the VAT Gap across the EU talks of:

“…. extending the use of automated access to data. To explore with member states the possibility to develop an automated mechanism that would allow a cross matching between the data reported by each party of every single transaction.”

Many commentators recognise that live transaction reporting for VAT is the future. This is not a new idea in the EU as there are 13 states that currently demand full electronic lists of sales and purchase transactions – some also require reporting on stock movements and banking transactions.

Is this where HMRC’s Making Tax Digital agenda could be leading the UK? Clearly if it is then, whilst the “What does Brexit look like” debate rumbles on, UK businesses have to keep their fingers on the pulse of what accounting systems and VAT changes will look like Pre-Brexit as well as Post.

For any questions in this regard do contact Liz Maher on

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