Making Tax Digital for VAT – what you need to know
The NFRN has produced a guide regarding digital record keeping and return requirements for Making Tax Digital for VAT.
To keep members up to date we will be providing regular updates and information on this page. If you need any help or have any questions, please do not hesitate to contact the public affairs team at firstname.lastname@example.org
Changes to VAT reporting will come into force in...
What is MTD for VAT?
From 1 April 2019, any business with an annual turnover over the VAT registration threshold of £85,000 as of 2018/19 will be required to keep digital records and submit their VAT returns digitally.
You will not have to submit any additional information or change deadlines for sending VAT returns.
You will no longer be allowed to use a paper-based record-keeping system to calculate the amount of VAT owed before submitting a paper return or manually entering calculations on the HMRC website.
If you currently use electronic spreadsheets, such as Excel, you will have to invest in specialist accounting software or bridging software (a tool to transfer data from one place to another) which can connect to HMRC. Please note that HMRC will not provide free software.
Only one submission will be allowed for each individual VAT registration number. If you keep multiple sets of accounts for different businesses, you will need to combine them into one figure for their VAT return.
- 1 April 2019: implementation date. In the first 12 months, HMRC will allow you to manually type in the 9 boxes of the VAT calculation to your bridging software. ‘Cut and paste’ cannot be used for VAT periods commencing on or after 1 April 2020.
- Mandatory use by certain organisations with more complex VAT requirements has been deferred to 1 October 2019. It includes businesses with one or more of the following VAT profiles: VAT group registration; divisional VAT registration; those required to make payments on account; those who use the annual accounting scheme.
HMRC will not impose penalties during the first 12 months of implementation, so that businesses have time to adapt to change. After that period, HMRC will impose sanctions in cases of deliberate non-compliance.
The Government intends to extend MTD reporting to Income Tax and Corporation Tax – but no change will be introduced before April 2020 at the earliest.
House of Lords backs NFRN
On 21 November, the Lords Economic Affairs Committee urged the government to delay the introduction of mandatory MTD for VAT by “at least one year.” The government has not responded yet.
The NFRN is relieved that such an influential parliamentary committee is taking our members’ concerns seriously, and calls upon the government to postpone the project. Read more
Checklist for retailers
Is your annual turnover above the VAT threshold of £85,000 as of 2018/19?
If your annual turnover is lower, you will not have to comply with MTD for VAT.
If your annual turnover is of £85,000 or higher, you will be required to comply by MTD for VAT.
Should you have any question on VAT, contact the VAT Helpline: 0300 200 3700 (Monday – Friday 8am – 6pm) or online.
When will MTD become mandatory for you?
Do you fall within one of these categories: VAT group registration; divisional VAT registration; you are required to make payments on account; you use the annual accounting scheme?
If you do fall in one or more of these categories: you have to be ready for MTD for VAT by 1 October 2019.
If you do not fall in at least one of these categories: you have to be ready for MTD for VAT from 1 April 2019.
Do you currently use software for VAT returns or an accountant?
If you do: contact your accountant or software provider. They will be able tell you if the software is compatible for MTD and next steps.
Do you keep your records manually?
If you do: You will have to acquire software. Check the list of MTD-compatible software providers recommended by HMRC.
Do you use spreadsheets to keep records (such as Excel documents)?
If you do: The spreadsheets must be able to submit the required data to HMRC digitally using compatible software. ‘Bridging software’ take information from spreadsheets and send it to HMRC digitally. Check the list of software published by HMRC.
Will HMRC subsidise the purchase of software?
HMRC will not provide the software for free.