Making Tax Digital for VAT: the latest developments

With the introduction of Making Tax Digital for VAT (MTD for VAT) rapidly approaching, new developments may affect how certain businesses prepare for the measure. We take a look at the latest changes to the MTD for VAT regime.

MTD for VAT is set to come into effect from 1 April 2019 for businesses which have a taxable turnover above the current VAT registration threshold of £85,000. As part of the initiative, businesses must keep some records digitally, and must submit their VAT returns via an Application Programming Interface (API).

Any business making use of MTD for VAT whose turnover subsequently falls below the VAT threshold must stay in the regime, unless they deregister for VAT. Any firm exceeding the registration threshold after 1 April 2019 must comply with MTD for VAT, and is given 30 days to ensure that the appropriate digital software is in place.

Deferral for certain businesses

In October, HMRC's MTD for VAT guidance was updated, outlining a significant deferral of the initiative for certain businesses and organisations. A small group of taxpayers with 'more complex' requirements will be given an additional six months to prepare for MTD for VAT, and will therefore not be mandated to use the system until 1 October 2019.

The deferral applies to: not-for-profit organisations that are not set up as a company; trusts; VAT divisions; VAT groups; local authorities; public corporations; and traders based overseas. Public sector entities required to provide additional information on their VAT return, those who must make payments on account, and annual accounting scheme users are also covered by the deferral.

Meanwhile, HMRC also launched its second pilot scheme for MTD for VAT, inviting more than half a million UK firms to test the system ahead of its April introduction. The pilot is open for businesses with 'up-to-date and straightforward' financial affairs. HMRC intends to extend the pilot to 'most other business types'.

MTD for VAT 'encouragement letters'

HMRC recently sent businesses within the scope of MTD for VAT so-called 'encouragement letters'.

These letters were sent to 200,000 firms which are eligible to join the pilot scheme, and some VAT-registered businesses with a turnover just below the VAT registration threshold.

HMRC stated that it is 'committed' to writing to everyone within the scope of MTD for VAT.

When should I start to prepare for MTD for VAT?

Businesses are advised to begin preparing for the initiative now. Firms will need to ensure that they are using digital accounting records as soon as possible.

As part of MTD for VAT, every business will be required to make use of an online Business Tax Account (BTA). Firms which do not currently have a BTA are advised to set an account up ahead of the MTD for VAT start date. The first step is to generate a Government Gateway ID – this can be done here.

Preparing for and complying with MTD for VAT will undoubtedly prove to be challenging for many businesses. As your accountants, we are always on hand to answer any questions you may have – simply contact us for more information.

Register for our newsletter

Once a month we'll send you an email packed full of essential business news and handy tax tips to help save you money.

Register

Weston-super-Mare

34 Boulevard
Weston-super-Mare
Somerset
BS23 1NF

01934 415022

Cheddar

Bath Street
Cheddar
Somerset
BS27 3AA

01934 743274


Home | Contact us | Accessibility | Disclaimer & Privacy Policy | Help | Site map |

© 2019 Four Fifty Partnership. All rights reserved.

We use cookies on this website, you can find more information about cookies here.


Registered to carry on audit work in the UK and Ireland by the Institute of Chartered Accountants in England and Wales. Details about our audit registration can be found at auditregister.org.uk under the reference C001092613.

"four fifty partnership" is a trading name of Four Fifty Partnership Limited. Registered in England. Company Number 5032008. Registered Office 34 Boulevard, Weston super Mare, Somerset BS23 1NF.

Directors: Richard Acreman BSc CTA, Joy Boswell FCCA FCA, Peter Ison BA FCA and Nick Gravell FCCA FCA.

Professional Indemnity Insurers: Nexus Underwriting Limited 52-56 Leadenhall Street, London EC3A 2EB (Policy Number: BC6210PIA194). The territorial coverage is worldwide excluding professional business carried out from an office in the United States of America or Canada and excludes any action for a claim brought in any court in the United States of America or Canada.