VAT registered businesses with a taxable turnover above the VAT threshold (£85,000) are now required to use the Making Tax Digital service to keep records digitally and use software to submit their VAT returns for VAT periods that started on or after 1 April 2019.
The requirements do not apply to VAT registered businesses with taxable turnover below the VAT threshold (e.g. those that have registered voluntarily) and HMRC has announced a deferral to the start date, of 6 months, for some more complex businesses:
- ‘not for profit’ organisations that are not companies (this includes some charities)
- VAT divisions
- VAT groups (the deferral applies to the group registration only and not to any group companies that are not covered by the group registration)
- public sector entities that are required to provide additional information alongside their VAT return (such as Government departments and NHS Trusts)
- local authorities and public corporations
- traders based overseas
- those required to make payments on account
- annual accounting scheme users
Businesses and organisations within the scope of MTD for VAT, will have to keep digital records and submit VAT returns using functional compatible software from the start of their first VAT return period beginning on or after 1 April 2019, or 1 October 2019 if they are covered by the 6-month deferral mentioned above.
Functional compatible software – Here is an up to date list of software suppliers from HMRC.
Sign up for Making Tax Digital for VAT
Sign up for MTD at least 72 hours before a VAT Return is due, or 7 days before if your client pays by direct debit.
The deadlines and frequency of your VAT Returns and payments will not change.
After you’ve signed up, you cannot use VAT online services to send VAT Returns.
RECENT UPDATES FROM HMRC:
HMRC has received numerous calls from accountants whose clients receive large numbers of invoices from single suppliers, such as builder’s merchants or drugs companies.
VAT returns for those clients have historically been prepared based on the supplier statements ( often a monthly summary), rather than the individual invoices. However, the concern until now has been that the MTD requirement relating to digital record keeping of supplies received required each supply received to be recorded individually.
The good news is that HMRC have recently updated the MTD VAT Notice 700/22, and this point is now specifically covered in paragraph 22.214.171.124. The update advises that while it remains HMRC’s view that best practice would be to digitally record the individual supplies, to manage risk of missed or duplicated entries, they accept that additional work for a business in capturing individual supplies digitally could in itself lead to data entry errors. On this basis, HMRC advise they can accept the recording of totals from a supplier statement where all the supplies on the statement relate to the same VAT period and the total VAT charged at each rate is shown. If a business does choose this option, they are also required to cross-reference all supplies on the supplier statement to invoices received, but HMRC go on to confirm this can be done outside of the digital records.
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