As if being a landlord wasn’t complicated enough. Touchy tenants, soaring service charges and now this – Making Tax Digital. If you’re a landlord of multiple properties, normally, you’ll charge VAT on top of your rent. And this means from April 2019, you’ll have to submit your VAT tax returns online to HMRC. It’s one more thing for you and your accountant to think about.

    What is Making Tax Digital and how will it affect landlords?

    Making Tax Digital (MTD) will affect landlords in the same way it affects businesses. Following consultation with various businesses, in July 2017 HMRC decided there would be delays for corporation tax and income tax going digital until at least 2020. However, for VAT, the decision was made that the original April 2019 deadline would stick. And therefore, that’s what you’ll need to report – your VAT returns.

    How to report your VAT returns online

    It’s likely you’ll have your VAT calculations in spreadsheets or on various software. But how do you get this to HMRC? Sadly, you can’t just send them your documents. To start with, you’ll need what’s called a “digital link” to make it happen. And there are two kinds of digital link software you have to choose from:

    • API enabled software – you may already use a program like Sage or, as we’d recommend, Microsoft Dynamics Business Central, for multiple things in your business. A lot of this software has the capability to submit your VAT returns data direct to HMRC. It’s easy.
    • A bridging software – we’re recommending this for lots of our clients who are landlords. A bridging software acts as a link between your spreadsheets or the software you’re using already. It’s good value and easy to use. And if you’re using multiple software or spreadsheets, it can link those together too – you’ll have to do this by April 2020 anyway.

    What if a managing agent or letting agent does your accounts?

    If you have a lot of properties – you might be a landlord on behalf of a business or pension fund – then it’s likely your managing agent or letting agent will help with your accounts. And if this is the case, rather than having lots of calculations or data to submit, you’ll probably just have a single number or summary to submit.

    HMRC have covered this in their guidance as follows:

    “A business uses a letting agent to rent out a number of properties. Each month the letting agent provides a summary of the rents collected and VAT charged. The business can treat all supplies covered in this summary document as if they were covered by a single sales invoice, rather than treating each invoice issued on their behalf separately. They can group transactions together providing they are within the same VAT period and are charged at the same rate of VAT.

    This rule would not cover circumstances where responsibility for supplies is assumed by other persons who are not third party agents of the business. For example, it does not cover supplies made by an employee on behalf of your business or by a charity volunteer for the purposes of a fundraising event such as a church fete.”

    What to do next

    A good first step would be to see if your existing accounting software has a digital link built in. If not, we think it’d be best for you to invest in bridging software. We’ve got software we’d recommend. And if you have any questions on Making Tax Digital, get in touch.


    SIMON BAINES, Partner and Head of Tax

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