Making Tax Digital for VAT
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
Businesses urged to register for Making Tax Digital before August
Businesses with an annual turnover above £85,000 are being urged by HM Revenue and Customs (HMRC) to sign up to Making Tax Digital before the 7 August VAT filing date.
Many of the 1.2 million businesses affected by the MTD rules, which became law for VAT periods starting on or after 1 April, will be required to submit their first quarterly VAT return to HMRC using software by the 7 August. If paying by Direct Debit, these businesses must register by Monday 29 July. Read more
Making Tax Digital system arrives
On 1 April 2019, businesses with an annual turnover above the current VAT threshold of £85K are now required to keep digital records and submit their VAT returns digitally.
According to latest HMRC guidance, you can apply for an exemption from MTD if you:
- Cannot use computers, software or the internet because of your age, a disability or where you live;
- Object to using computers on religious grounds; or
- Your business is subject to an insolvency procedure.
To apply for an exemption, contact HMRC with:
- Your VAT registration number;
- Your business name and address;
- Details of how you currently file your VAT Return; and
- The reason you think you’re exempt from Making Tax Digital.
HMRC will contact you when they make a decision. Until then, continue filing VAT Returns the way you usually do.
Take outs from MTD webinar
On 19 February 2019, the NFRN political engagement team attended a webinar on Making Tax Digital for VAT run by HMRC. From 1 April 2019, businesses liable to VAT will be required to keep digital VAT business records and send returns using Making Tax Digital (MTD)-compatible software.
During the webinar, the HMRC Customer Readiness Team urged businesses to contact their accountant or familiarise themselves with the guidelines produced by HMRC as soon as possible. There will be no automatic enrolment to MTD, so businesses need to sign-up. The ‘soft landing period’ will not cover all penalties, so businesses need to comply with MTD from the first year – from April 2019.
Firstly, check whether you fall under the scope of MTD for VAT. Then, you will decide whether you need to purchase new software. If you do not currently use software, you will want to have a look at the list of compatible software published by HMRC. If your software is not MTD-compatible, you might also want to purchase new software from this list. Alternatively, you might want to upgrade your current software – 40% of suppliers said that they will not apply additional charge. If you are using digital spreadsheets, you might want to purchase bridging software (software that ‘communicates’ digitally with HMRC, as you will no longer be able to enter your returns manually). If you are using an accountant, make sure you talk to them as soon as possible to get ready for April.
HMRC will continue publishing additional notices to support businesses in the coming weeks. The NFRN will continue to keep members updated.
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.
- Businesses with an annual turnover above £85,000 must sign up to Making Tax Digital before the 7 August VAT filing date. Many of the 1.2 million businesses affected by the MTD rules, which became law for VAT periods starting on or after 1 April, will be required to submit their first quarterly VAT return to HMRC using software by the 7 August. If paying by Direct Debit, these businesses must register by Monday 29 July.
- 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.
Making Tax Digital for VAT: step by step
HMRC has produced guidance to help businesses prepare for ‘Making Tax Digital for VAT’ which takes effect from this spring.
There are six steps to follow to ensure your business is ready to submit your VAT returns electronically from April 1 2019.
Links to appropriate software, communication pack and services accounts also feature. You can use these for your business or share the advice contained with your accountant.
The guidance is available at: https://bit.ly/2MYInPc
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.
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.