VAT and Spectacle and Contact Lens Dispensing
MTD are you compliant?
There are a number of briefings designed to help practitioners understand mixed sales of partially exempt goods
Business Briefings by Bob Hutchinson
Principal Eros Business Consulting
April 1st 2019 was no April Fool’s Day for VAT registered Businesses!
It was indeed MTD day.
Are you now compliant for “MTD” (Make Tax Digital), a warning to all businesses VAT registered following HMRC’s VAT Notice 700/22
From April 1st, 2019 HMRC will no longer allow businesses to keep paper records and input the return in the 9 boxes on line from them
Rules introduced under the “Making Tax Digital” initiative mean VAT registered businesses with taxable turnover above the VAT registration threshold need to keep digital records and submit VAT Returns to HMRC using compatible software to upload the input digitally without manual input.
This notice explains:
• the digital records businesses must keep, and ways to record transactions digitally in certain special circumstances
• what counts as compatible software, and when software programs do and do not need to be digitally linked where a combination of programs is used
So, all records must be digitalized either in excel spreadsheets or proprietary branded accounting software.
Many of Eros’s optical clients use spreadsheets for convenience and to save expense and they would normally transcribe the results from these spreadsheets to the online HMRC resource each quarter. This will no longer be possible as a secure link must be made from the spreadsheet to the HMRC site without any manual input.
Over the last few years EROS has provided a vatcalculator spreadsheet to many of our clients especially those businesses where we have agreed a Full Cost Apportionment with local officers on their behalf.
Bob Hutchinson, Principal at Eros Business Consulting was one of two original co-authors of the Full Cost Apportionment agreement with HMRC. “This ground-breaking change has crept up on all industries but as usual it has a more complicated effect on mixed supply businesses, such as Optical Practices, because of the partial exemption calculations that are needed before finalising your tax take.”
The EROS vatcalculator spreadsheet:
• automatically calculates whether the de minimis level has been breached, so that the business is warned about the risk of losing their purchase vat reclaims.
• provides the end result for the return on the last work sheet in a VAT return format showing the 9 boxes required for input online.
• Input of sales from PMS systems and payments/invoices for purchases is simple
This once allowed traders to cut and paste the results on line. No Longer! the action of input must be by automatic input, only available with special software.
HMRC provides a plethora of software suppliers as suggestions but none are vetted although they may have possible solutions or provide a full accounting service but often fail for partial exemption supplies.
Eros has been analysing a number of accounting software packages who limit the costs drastically. Theirs’s is a simpler practical system and they do this by providing bridging software which is HMRC compliant because it is permanently linked with a business’s spreadsheet.
So, for example the EROS vatcalculator’s last input page which self-completes when the figures are applied for sales and purchases is bridged by the software, and information is automatically relayed to HMRC.
So, what’s the time frame
All businesses requiring registration with taxable sales in excess of £85000 pa must move to the new system for their first completed period that commenced after April 1st, 2019, but there is a soft-landing period. This period allows for legacy systems that do not interact digitally to be corrected, however the inputting of a return must be made digitally from April 2019. So, businesses whose 1st return in the year is between April 1st to October 1st, 2019 must change their methodology by the end of this year. Those whose 1st yearly return is after October 1st have the additional 6 months. New businesses must adapt immediately.
The EROS solution.
We are currently testing the bridging software in the first quarter in April 2019. Once that has been ratified as compliant by HMRC we will be advising our clients and new customers on implementation and the costs. The more clients who chose our system the cheaper the rate we can obtain.
Keeping the costs down.
Our role will be as receiver and account agent to upload your spreadsheet return digitally. Receiving these in good faith that they are correct and retained by yourself for inspection and we keep the copy you send to us.
Extra Services from EROS
If you do not check your partial exemption position you are at risk of losing vital purchase tax reclaims. So, we can set you up with a vatcalculator spreadsheet that will do the whole job for you seamlessly. Cost dependent on size and type of business.
If you think your cost apportionment figures are not correct or have never been accepted by the HMRC in writing, then we are here to help.
More Information: VAT Notice
Call us for an assessment of your needs and a discussion of how we can help with practical ideas.
Eros Business Consulting Ltd, Hall Barn, The Street, Preston St Mary, Suffolk C010 9NG, 01787 326468
Call +44 (0) 1787 326468