Making Tax Digital: changes to UK VAT compliance

This blog post was written by Marc Verbeek.

Marc Verbeek is a Tax Partner currently working for Crowe Horwath Vanhuynegem Associates in Belgium, prior to this he worked at the Belgian Ministry of Finance, before moving on to spend 26 years with BDO. Marc is a certified tax consultant. His expertise includes (international) corporate tax advice, international employment tax, corporate tax compliance, rulings and litigation.

One of the biggest changes to the way UK companies interact with HMRC, the UK tax authority, is coming into effect from 1 April 2019. Making Tax Digital (MTD) is HMRC’s initiative to bring technology and tax together, allowing HMRC to become a “world leading, digital tax authority.”

What does it mean?
The changes will mean that all UK VAT registered organisations with a turnover above the UK VAT registration threshold (£85.000) will have to:
• keep, and be able to provide, their UK VAT records digitally.
• submit their UK VAT data to HMRC through compatible software, not through the HMRC online portal.
HMRC will no longer allow UK VAT return figures to be manually entered in the HMRC online portal when submitting the UK VAT return. Instead, you will need to have software capable of doing this for you.

Will I be affected?
Any business registered for UK VAT as their turnover has exceeded the UK VAT registration threshold will be affected. Of those, some already have a digital mechanism to transpose the figures from the UK VAT return workings to a submission, however the majority do not. According to figures from the Chartered Institute of Taxation, the leading professional body in the UK for tax advisers, 87% of UK VAT taxable persons will have to take action as a result of the new rules. The only exemptions will be for religious reasons or in the event of insolvency procedures.

What about international businesses?
Of particular interest to Belgian businesses will be that almost everyone who is UK VAT registered will have to comply with the MTD rules; being established overseas or submitting UK VAT returns outside of the UK will not result in an exemption from MTD requirements.
In addition, it may be a greater challenge to overseas organisations to comply with MTD for UK VAT as their UK activities are likely to be a single part of a larger international activity. This could also be the case for UK organisations who are part of international groups required by their overseas head offices to operate specific accounting or reporting processes and software.
As a result, if your organisation is currently manually entering the UK VAT return figures on HMRC’s portal, MTD will present a significant change to your current UK VAT processes.

What are the main requirements?
HMRC’s intention is that software will be used to maintain the relevant digital records, calculate the UK VAT return figures and to submit the return electronically. This is to be done using functional compatible software.
This software should also act as a digital ‘bridge’ between the UK taxpayer and HMRC’s systems. It will no longer be acceptable for an organisation to manually transpose figures when submitting their UK VAT returns.

When does this take effect?
HMRC has indicated there will be a “soft landing” period between April 2019 and April 2020 without application of financial penalties for record-keeping failures. This is to assist organisations by allowing extra time to update their systems to be fully compliant. There will however, have to be a digital link from the outset between the spreadsheet and the linking software that submits the UK VAT return digitally.
MTD as it currently stands is likely to just be the start of the road; it is intended to be introduced for UK Income Taxes in April 2020 and it is not unreasonable to expect that the scope of what information and data is available electronically for HMRC to access remotely will only get broader. As a result, even with a soft landing period, companies need to proactively take steps to ensure they remain compliant.

What software should I use?
HMRC has stated that it will not be providing software for organisations to use, and currently they have not yet informed taxpayers as to commercial software suppliers who will be providing the “functional compatible software”. Commercial software providers are developing solutions and some organisations will have sufficient in-house IT capability to build their own.
“Functional compatible software” is a software program or set of compatible software programs that must be able to:
• record and preserve electronic records in an electronic form for up to six years
• create a UK VAT return from the digital records
• provide to HMRC information and returns from the electronic records in an electronic form and by using an Application Programme Interface (API) to link to HMRC’s systems
• receive information from HMRC.
There “must be a digital link” between all software used by the organisation for its UK VAT compliance. Examples are given in HMRC’s guidance and a very common one, likely to be familiar to a large number of organisations, is the situation where to prepare the UK VAT return the taxpayer:
– maintains its sales and purchases data in an accounting system
– downloads this data into a spreadsheet for manual manipulation
– manually enters the figures into HMRC’s website for submission.
Under the new rules, the links between the two software programs (accounting system and spreadsheet software) must be digital.

What now?
Although the implementation date is in 2019, like all technology projects, there is a lead time in making the necessary changes to be able to successfully implement the measures needed to comply with the new rules.

Organisations affected by MTD need to consider a strategy for the immediate requirements to be ready for the April 2019 launch date and also give thought as to whether these preparations should include a readiness for a likely future expansion of the MTD requirements, be it for additional UK VAT data or for other UK taxes such as Income Tax.

COBCOE Report

COBCOE recently released a new report titled “Review of European business views
on the Transition Period” which comprised of business input from businesses in the UK and across the EU. Some of the input came from our Brexit Ambition Roundtable February 2018 event held at the chamber. This report was shared with government official and is aimed to influence current negotiations between the UK and EU.

 

To view the full report click here.

Brussels Moves!

Brussels Moves!

Help shape the future of the city and have your say on transport, air pollution and voting rights for foreigners. Ahead of The Bulletin’s debate on 26 April, we’d like to hear your opinions on how to make our city a better place. Fill in our quick survey here.

The Bulletin invites you to the free event, followed by networking and a free drink.
When: Thursday 26 April, 19.00-21.30
Where: KBC Group, Avenue du Port 2, 1080 Brussels (metro Yser)
Book your place here now!

Reaction to European Council (Art. 50) guidelines on the framework for the future EU-UK relationship – 23rd March

 

The British Chamber welcomes the EU and UK transitional agreement allowing additional time for a deep and comprehensive future relationship agreement to be negotiated. We also, welcome the UK and EU’s joint intention to achieve a post-transition relationship that satisfies the mutual interests flourishing between them.

We ask:

• the European Council to deliver a negotiation mandate which enables the broadest and deepest possible relationship between the UK and EU to be agreed,

• the UK to present, without delay, its written proposals for a deep and comprehensive future relationship with the EU27 as soon as possible, and that this proposal contain sufficient details on how trade between the UK and EU in each business sector will function, so that EU and UK business have enough time to understand how it will need to adapt and minimise disruption to customers, supply-chains and the workforce.

Golden Bridge Awards: Catch up with our winners

This year once again saw a host of brilliant companies as finalists in the Golden Bridge Trade & Investment Awards at the British Residence in Brussels. The evening celebrated the ever growing UK-Belux trade, with all our finalists showing initiative and success to make the UK-Belux relationship even stronger. The three 2017 winners, ALE, Les Carrières de la Pierre Bleue Belge and Renson have taken the time to tell us about their success as a Golden Bridge Trade & Investment Awards Winner.

Golden Bridge Award for Best Innovation in Export for a UK company

“When we filled out the application form we were not sure what to expect and throughout the process we were questioning how well we would do. Our client was convinced of the added value we could bring to the project in Zeebrugge, Belgium, but, was wondering whether others, not necessarily from our industry, felt the same way.

After being shortlisted we had the opportunity to present to the judging panel. This was a great experience, as we only had limited time the elaborate how the project had become reality. Starting with a simple request from our client we began adding additional scope and grew it to a solution we could not have imagined at the beginning.

ALE created a joint venture with two Belgian companies, ICO and Iemants. This joint venture combined its services to deliver an integrated solution that truly crossed bridges and led to success similar to what we have done, again, for the Golden Bridge Awards: The British and Belgians working together.

Winning the Golden Bridge Award for Best Innovation in Export is a wonderful achievement and a true dedication to the entire project team that worked on the project executed in Zeebrugge.”, said Yannick Sel, Sales Director.

Best Small and Medium Sized Enterprise

“We are delighted that our partnership with quarry Pierre Bleue Belge has won the 21^st Golden Bridge Award for Best Small and Medium Sized Enterprise, celebrating the export success of the world famous Belgian blue limestone (Bluestone) to the UK.

The award acknowledges the consistent growth Pierre Bleue Belges exports to the UK, currently they export 28% of turnover with 5% going to the UK. The judges were particularly impressed with the ethically secure supply chain, in compliance with the Modern Slavery Act and environmental factors as the quarry is less than 200 miles from London.”, said Alan Gayle, Director.

Golden Bridge Award for Belgian company

“Winning the Golden Bridge Trade & Investment Award was a huge honour, Renson’s UK Sales Director Bill Hayward says: “It supports Renson’s choice to expand into international markets, specifically in the UK. Renson invests heavily in innovation, communication and internationalisation, always with the focus on a healthy and comfortable indoor environment. The company entered the UK market over 20 years ago understanding the importance of the UK market to its growth. Winning the Golden Bridge Trade & Investment award proves that Renson’s belief in a strong relationship between Belgium and the UK is absolutely key to the success and growth of us as a group. At the same time, it reinforces our pride in our Belgian roots and emphasises our will to support local initiatives whilst respecting our company DNA. Having a local factory in the UK helps us to respond to local needs in a fast, efficient manner, being awarded for this cross border relationship takes our mark to a higher level both in the UK – where Renson can continue to build market share and leading innovation from the front, as we are proud to do in Belgium.”

The 2017 winners’ testimonials clearly show the value that the Golden Bridge Trade & Investment Awards initiative has for winning companies. Once again we congratulate this year’s Golden Bridge Trade & Investment Award winners and look forward to following their journeys.

The application process will soon open for our next Golden Bridge Trade & Investment Awards, which will be held in London.

For more information on the Golden Bridge Awards opportunities and how you can get involved, contact Alexandra.

Employment opportunities: British Black youth and the ‘ethnic penalty’

The persisting ‘ethnic penalty’ encountered by British black and ethnic minority within the employment market has been reported by a plethora of bodies, namely British parliamentary committees (i.e., Department for Work and Pensions), the Equality and Human Rights Commission, leading think thanks (i.e., the Runneymede Trust), trade unions (i.e., Trade Union Council) and so forth. The ‘ethnic penalty’ concerns the barriers to opportunities and discrimination experienced by groups of people due to their race and ethnicity.

Within this context of barriers to black and ethnic minorities and employment opportunities there is the question of the plight of British black and ethnic minority young people. According to a recent report by the UK’s Parliamentary Work and Pensions Committee (1), “There are stark differences in youth unemployment by ethnic group. In the year to June 2016, the unemployment rate among 16-24 year olds was 30% for black people, 26% for people from Bangladeshi or Pakistani ethnic background, and 13% for white people. While unemployment rates fall substantially with age for all ethnicities, the relative positions of the groups largely persist (2017, 11).”

 

Moreover, within this demographic is the ‘silent catastrophe’ or ‘moral panic’ concerning young black men, particularly of African and Caribbean background. Young black men have higher unemployment rates than all other groups of young people. The discrepancy between unemployment rates for young black men and white men has widened in recent decades. Essentially, young black men experience higher rates of unemployment notwithstanding their favourable educational attainment and regardless of their level of qualification. Moreover, black university graduates are twice as likely to be unemployed as white graduate (2).

The implications of this lamentable waste of “human capital” for the individual, families, communities and society is cataclysmic. In order to address the situation of Britain’s black youth unemployment urgent transformative measures are required which include:

• Robust data and knowledge gathering on how the intersecting aspects of ‘race’, social class, affects young black people access to employment opportunities.
• Government intervention which requires all employers and occupational training providers to set targets for the recruitment of vulnerable groups. Notwithstanding that all minority groups are affected by the ‘ethnic penalty’ in some form but for black young people starting out in life it is a major impediment. Thus, it is crucial that the government set the conditions for the necessary change.
• The need for effective penalties for employers found to be discriminating against black applicants.
• The need to give greater incentives to employers to recruit, retain and progress young black people’s careers.
• Monitoring youth programmes and apprenticeship schemes for their achievement and success in obtaining black young people’s participation and permanent job offered on completion.
• Promoting vocational educational pathways for young people – particularly careers advice and pursuing parity of esteem between vocational and academic qualifications.
• Setting priorities for youth training and employment: vocational qualifications and developing a diverse workforce.

 

There is a key role for employers to play in reducing the ‘ethnic penalty’ and they could begin this process by examining their recruitment procedures.

 

References:

1. House of Commons Work and Pensions Committee, Employment opportunities for young people 2017, Ninth Report of Session 2016-7. Published on 29th March 2017.
2. Wright, C; Standen, P; Patel, T. (2010), Black Youth Matters: Transitions from School to Success, London and New York: Routledge.

 

Professor Cecile Wright, School of Sociology and Social Policy, University of Nottingham UK, Highfield House, University, University Park, Nottingham NG7 2RD. UK

Golden Bridge Trade and Investment Awards 2017 – Last Call for Applications

Gain visibility and recognition for excellence in trade and export by applying for the Golden Bridge Trade and Investment Awards.

What is the Golden Bridge Trade and Export Awards?

The 2017 Golden Bridge Trade and Investment Awards present an exciting opportunity for UK companies trading or investing in Belgium, and Belgian and Luxembourgian companies trading or investing in the UK to showcase their bilateral success to an international jury and celebrate their achievements during an exclusive ceremony hosted by the British Ambassador to Belgium, Alison Rose at the British Residence in Brussels, at the heart of Europe.

The Golden Bridge Awards is co-organised by the British Chamber of Commerce in Belgium and the Belgian-Luxembourg Chamber of Commerce in Great Britain.

Fun fact: Belgium was the 7th largest export market to the UK and the UK was the 12th largest export market to Belgium last year.

Why should you apply?

Expand your international network, gain business and political expertise, receive recognition for your achievements.

The Golden Bridge Award opens doors to an international network and the connections businesses need to succeed both at home and abroad. Our international panel of judges from the business community are also affiliated with regional trade and investment bodies as well as embassies from the UK, Belgium and Luxembourg.

Winning a Golden Bridge Award will solidify your credibility on any of the three markets and will reinforce your pivotal role  in the economic relationship between Belgium, the U.K. and Luxembourg.

Previous winners of the Best Newcomer category, Orega, shared that the recognition for their export credentials gave them even greater visibility.

“It has sent the right message to our business partners based in Belgium. The award delivers to our potential customers a strong message, as we were new comers on the market.”
-Orega, Golden Bridge Best Newcomer Winner 2016

The award made a positive impression on their business partners with their improved credibility.

Bel’Export, 2016 winner of the Golden Bridge Award for UK business to Belgium, shared that the Golden Bridge award raised their company profile internationally as well as at home.

“As company you gain visibility, in – and outside the UK. It is a recognition for doing a good job.”

-Bel’Export, Golden Bridge Winner 2016

What will you win?

The winners of the Global Bridge award will receive:

• Visibility at the awards event itself.
• A one-year free membership* of the British Chamber. If you qualify under our SME criteria, you receive free  membership already if you are shortlisted as a finalist.
• Participation in our Golden Bridge Awards Winners’ Day programme in Brussels in January 2018 to celebrate your success.
• Your company featured in the British Chamber’s annual publications and in articles on our social media channels.

Apply now! The final registration deadline is 30^th September!
Do you want to be a Golden Bridge Awards partner? Check the Golden Bridge Trade & Investment Award page on our website for more information or contact Alexandra Trandafir at alexandra@britishchamber.be.

 The Gala Dinner for the Golden Bridge Awards will take place on Wednesday 22^nd November 2017 at The British Ambassador’s Residence in Brussels. The applicants will be shortlisted based on their financial performance, their innovation and strategy abroad, and their motivation for entering the awards.

*regular membership