Dragon2000 has urged dealers to ensure they are compliant with the Government’s new Making Tax Digital service, designed to make it easier for businesses to get their tax right and keep on top of their affairs.
From April 1, all VAT-registered businesses with a taxable turnover above the VAT threshold (£85,000) are required to keep their VAT business records digitally and send their VAT returns using MTD-compatible software.
In simple terms, dealers will no longer be able to manually type in the VAT return figures into the HMRC system, as it must be submitted digitally.
Dragon2000’s commercial manager, Mark Kelland (pictured), said: “We have been in regular communication with the HMRC MTD development team on all things Making Tax Digital since 2017, so we have a good grip on what will be required by car dealers.”
From the April 2019 deadline, any software that prepares a VAT return to send to HMRC for businesses must use MTD and be MTD-compatible. This means that it can integrate with HMRC systems for VAT submissions.
“Provided that those accountants or book-keepers working on behalf of dealers have registered as a tax agent with the HMRC to submit returns and are using MTD compatible accounting software, then dealers will comply, as long as their records are kept digitally,” said Kelland.
“There are some exceptions, for a small minority with more complex tax requirements, who will have the start date deferred for six months. We have seen articles in the media recently advising dealers that ‘many dealerships will be classed as complex’ and will have a little longer to prepare.”
Data must be exchanged digitally between all software used by a dealer for VAT as HMRC’s goal is to eliminate paper-based processes and manual data entry errors in reporting VAT figures.
The usual HMRC deadlines for sending VAT returns and making payments will not be changing. The introduction of Making Tax Digital does not require dealers to keep any additional business records, but business records must be kept digitally to be compliant.
Kelland said: “However, this only applies to categories of businesses that are trusts, ‘not for profit’ organisations that are not set up as a company, VAT divisions, VAT groups, those public sector entities required to provide additional information on their VAT return (Government departments, NHS Trusts), local authorities, public corporations, traders based overseas, those required to make payments on account and annual accounting scheme users.
“Dealers should not be fooled into thinking because they use the Margin VAT scheme, this makes their business ‘complex’ and they can avoid the changes until October 2019.
"The reality is that with MTD beginning in April 2019, dealers do need to act now if they do not have any accounting software in place or a dealer management system to record transactions digitally.
“If dealers have older accounting software that isn’t MTD compliant, don’t have an accountant that submits VAT returns on their behalf, or don’t have any digital accounting software in place at all, they will need some help.”