Making Tax Digital: reviewing the new requirements Making Tax Digital for VAT (MTDfV) ushers in mandatory new requirements from 2019. However, the change isn’t just about VAT: MTD affects the very way that businesses keep accounting records.
Quarterly filing dates Start of first return period subject to MTD
First quarter end within MTDfV
First MTD VAT return deadline (month plus 7 days)
March/June/Sept/Dec 1 April 2019
30 June 2019 31 July 2019 31 August 2019
7 August 2019
1 May 2019 1 June 2019
7 September 2019 7 October 2019
New rules MTDfV means that businesses must keep some records digitally. Coupled with this, VAT returns in future must be submitted to HMRC via an Application Programming Interface (API). Submission can be from API-enabled spreadsheets, software or bridging software – software spanning the gap between business software and HMRC systems, permitting two-way digital communication and using MTD APIs. HMRC acknowledges there will be different ways to submit VAT returns under MTD, but the transfer of data to HMRC, from the mandatory digital records to the filing of the return, must be entirely digital. VAT Notice 700/22: Making Tax Digital for VAT outlines the requirements in more detail.
Who is affected? MTDfV affects any business with taxable turnover above the £85,000 VAT registration threshold on 1 April 2019, regardless of its legal structure. Any business in MTDfV whose turnover subsequently falls below the threshold must stay in MTDfV, unless deregistering for VAT. Voluntarily registered businesses currently below the registration threshold can elect to join MTDfV but are not mandated to do so. Any business exceeding the registration threshold after 1 April 2019 must also comply with MTDfV – and is given only 30 days to get digital. Voluntarily registered businesses need particular vigilance. Exceeding the threshold brings them into MTD immediately. Example XYZ Ltd voluntarily registered for VAT in 2017. By 30 November 2019, cumulative sales in the previous 12 months exceed the mandatory VAT threshold. MTDfV rules apply to XYZ Ltd immediately – that is, from 1 December 2019. As it’s already VAT registered, there is no 30- day grace period.
Who is exempt? Exemptions are limited to: • businesses run by practising members of a religious society or order with beliefs incompatible with regulation requirements • businesses subject to an insolvency procedure • those satisfying HMRC that, for reasons of age, disability, remoteness of location or for any other reason, it is not reasonably practicable for them to use digital tools to keep business records or submit returns. HMRC agrees exemption may apply even if someone is not currently exempt from VAT online filing and may offer ‘digital assistance’ where it doesn’t consider exemption appropriate. If satisfied that keeping and retaining the specified information for each transaction is ‘likely to be impossible, impractical or unduly onerous,’ HMRC may vary the detail to be kept electronically.
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