MTD Phase 2 VAT - DELAYED, but are you ready...

The implementation of MTD phase 2 for VAT was due to be implemented in April 2020, however due to the unexpected turn of events this year, HMRC have delayed this until April 2021. So what does phase 2 actually mean and are you ready?

Phase 1 was introduced in April 2019 and HMRC called this its “soft landing” this meant that businesses where allowed to use basic bridging software to submit their returns. With Phase 2 coming in the use of this software seems to be ruled out. So, what does Phase 2 bring in addition to Phase 1.

Phase 2 in summary means 3 key elements in how we submit VAT returns.

1. Implementation of stringent new rules in regard to the digital links and how the return is uploaded.

2. The software used to submit the return must have permanent data on a transaction basis to support the return submitted with digital links between the two. Must be full end to end digital journey from source document to appearing on VAT return. This is the real key difference from Phase 1.

3. Implementation of penalties for any non-compliance will be introduced. These could be up to 15% of the VAT due, so clearly a sizeable penalty for any business!

The overriding aim for this change, according to HMRC is to eliminate the human error element of the VAT submission.

Many businesses have been using simple bridging software to successfully submit MTD VAT returns in the past year, this will need to be reviewed and look at the software used to submit the returns.

At In Financials Limited we have a complete offering of software packages that are fully MTD complaint and match any budget from sole trader to Limited company. So please get in touch today to find out more, we are more than happy to help.