Changes to VAT for 2019/20
21st May 2019
Most VAT-registered businesses have entered into recording and submitting digital accounts, and the final few will follow suit in the next month.
Those with more complex accounts have a little longer, until 1 October 2019, before they have to comply with Making Tax Digital.
Some VAT-registered business owners have weighed up the pros and cons of taking their taxable turnover below £83,000.
Not only would this save them from paying VAT at 20%, it would provide them a stay of execution from MTD - at least for the time being.
Others have more VAT-related hurdles to overcome in 2019/20.
Construction industry reverse charge
While VAT-registered businesses in the construction industry are coming to terms with MTD, they also have to prepare for another change later this year.
From 1 October 2019, the VAT reverse charge for construction services will come into effect.
The aim is to prevent missing trader fraud where subcontractors abscond with the VAT collected for work on a building project.
This puts the onus on the recipient of construction work to account for the VAT on the supply as a reverse charge.
Construction businesses have six months to review supplies made and received from VAT-registered contractors to determine what will be liable.
It would also be wise to plan for any impact on cashflow from October 2019 onwards, in case you don’t receive the VAT from your customer.
Registration threshold frozen until 2022
The VAT-registration threshold was frozen at £85,000 until 1 April 2020 in the last Budget, and Chancellor Philip Hammond extended that until 1 April 2022.
It is thought in some quarters that the registration threshold is a barrier to the growth of business, so this issue is likely to be revisited in future Budgets.
The Chancellor did state that he would be “looking at the possibility of introducing a smoothing mechanism once the terms of the EU exit are clear”.
Get in touch
We’re happy to discuss all things VAT for the year ahead and beyond. Contact us on 0117 973 3377 or email us at firstname.lastname@example.org to find out more.
Despite our recent merger with Burnside Chartered Accountants, you will still be able to communicate with us using these details.