Making Tax Digital (MTD) for VAT is here and many of our clients are on board with the changes. If you haven’t yet made these changes in your business or still have some questions regarding MTD, then take a look at these frequently asked questions and answers relating to MTD for VAT.
Who must follow the rules from 1 April 2019?
You must use software to keep digital VAT records from your first VAT Return period starting on or after 1 April 2019 if your business:
- has a taxable turnover over £85,000
- is not in the deferral group
Who can apply for an exemption?
You do not need to apply for an exemption if either:
- you’re already exempt from filing VAT Returns online
- your business’s taxable turnover is below £85,000
You can apply for an exemption if you:
- cannot use computers, software or the internet because of your age, a disability or where you live
- or your business are subject to an insolvency procedure
- object to using computers on religious grounds
What is Making Tax Digital compatible software?
MTD compatible software is a digital tool that:
- allows you to record and preserve electronic records in an electronic form
- allows you to report VAT information to HMRC
- allows HMRC to send information to you
Can I still use spreadsheets?
Yes, you can still use spreadsheets to keep digital records. However, you must then be able to send your VAT return information to HMRC digitally, without having to type information from one system to another.
The most common way to do this is to use ‘bridging software’ which allows you to take relevant information from your spreadsheet digitally and send it to HMRC.
What records do I need to keep as part of MTD for VAT?
The following records must be kept in an MTD compliant format:
- Business name
- Business address
- VAT registration number
- Record of any VAT accounting schemes used.
For each supply you make:
- The time of supply (the tax point)
- The value of the supply (Net excluding VAT)
- The rate of VAT charged.
For each supply you receive:
- The time of supply
- The value of the supply
- The amount of input tax that you will claim.
Your summary data, including:
- The output tax due on sales
- The output tax due on acquisitions from other EU member states.
- The tax payable on behalf of your supplier under reverse charge procedure.
- The tax that needs to be paid following correction or error adjustment
- The input tax claimable from business purchases
- The input tax allowable on acquisitions from other EU member states.
- The tax reclaimable following a correction or error adjustment
- Any other necessary adjustment required by VAT rules
My business isn’t VAT registered. What should I do if I go over the VAT threshold?
Once your turnover has exceeded the taxable turnover limit, you will have to comply with the requirements of MTD, even if your turnover subsequently falls below the VAT registration. You will be required to VAT register and come within the scope of MTD if;
- At the end of any month, the value of your taxable supplies in the previous 12 months or less is over the registration threshold.
- At any time you expect the value of your taxable supplies in the next 30 day period alone, to go over the registration threshold.
Are there penalties for not complying?
Yes, failure to comply with MTD may incur penalties.
Who must follow the rules from 1 October 2019?
You might be in the deferral group and must use software to keep digital VAT records from your first VAT Return period starting on or after 1 October 2019 if your business:
- is part of a VAT group or VAT division
- is a trader based overseas
- is a trust
- is a not for profit organisation that is not set up as a company
- uses the annual accounting scheme
- is a local authority
- is a public corporation
- has to make payments on account
- uses the VAT GIANT service
HMRC will send you a letter to tell you that you’re in the deferral group.
If you have any further questions or want to discuss your options further then please get in touch with us here.