Implementation of the VAT elements of HMRC’s Making Tax Digital (MTD) initiative has put non-compliant construction companies and contractors under pressure to rapidly re-evaluate their business systems and put the necessary solutions in place.
That’s according to Andrew Skudder, CEO of Construction Computer Software (RIB CCS), who says the construction sector – which has lagged other industries in digitising processes – is now under pressure to implement modern digital systems as soon as possible.
MTD is an initiative from the UK government to modernise tax, and sees businesses use a digital tax account as the central hub from which they update information, register for tax services, and manage payments. The VAT element of MTD went live – with some exemptions – in April, with corporation and income tax to follow.
To comply, companies must keep digital VAT records and submit their VAT records directly to HMRC via MTD-compatible software. Accounting records also need to be retained digitally in accounting software for the applicable mandatory period for a construction company to be compliant with MTD.
VAT calculations, VAT return dates, payment frequency and the nine fields of the VAT return will remain unchanged. However, companies will no longer be submitting data via HMRC’s website. Instead, the data will be sent directly to HMRC from the software via an Application Program Interface, in much the same way as PAYE submissions work.
Mr. Skudder says construction companies can benefit from implementing software specifically designed for the industry to manage MTD-compliant VAT submissions. “Combining your MTD-compliance effort with the implementation of construction-specific enterprise accounting and project cost control software is the best solution to addressing the new regulation,” he adds.
“This is an opportunity to permanently address the requirements of MTD, while streamlining business processes and achieving end-to-end visibility into business performance. It is a more cost-efficient and less risky approach than implementing a temporary fix such as spreadsheets or bridging software to meet MTD requirements in the short term.”
BuildSmart is the ideal solution to ensuring an MTD-compliant, integrated, cloud-based, enterprise management system that provides industry aligned information to construction and engineering companies. The platform integrates costing, project accounting and enterprise accounting for real-time analysis and effective management of construction businesses.
BuildSmart captures VAT data in a single system, while maintaining the required HMRC digital links, submits the return and stores the data digitally for the prescribed period. Invoices are system-generated and retained digitally in the software. This means that it makes it simple for construction companies to:
- Store digital records in accordance with the new regulations.
- Generate VAT returns from these records.
- Share VAT data with HMRC.
Integration between BuildSmart and Candy – RIB CCS’s project control system – provides information in real time to all levels of the business. This allows construction companies to make informed decisions throughout the lifecycle of a project, from the tender stage up to compiling group financials. This solution can be implemented rapidly enough to make a construction company compliant with MTD within its next VAT quarter.
“Construction companies that put an integrated platform in place today will not only be well placed for the rollout of further MTD initiatives, but will also be able to gain better control of costs, protect profit margins, highlight inherent risk, enhance project management and ensure better reporting on overall productivity,” Mr. Skudder says.