Making Tax Digital (MTD) for VAT – Frequently asked questions

How will MTD affect my business?

From 1 April 2019, all VAT registered businesses with taxable turnover above the VAT threshold of £85,000 will need to:

  1. Keep and preserve their VAT records in a digital format
  2. Send VAT returns to HMRC using MTD compatible software.

You will no longer be able to file your VAT return via the HMRC website portal

Does MTD for VAT apply to my business?

If your business is currently VAT registered with VAT turnover above £85,000, then MTD for VAT will apply from 1 April 2019.

My business is VAT registered but my turnover is below £85,000. Does MTD for VAT apply to me?

No, MTD for VAT will only apply to those VAT registered businesses with VAT turnover of over £85,000. (VAT turnover includes standard rated, reduced rated and zero-rated supplies. It excludes all supplies outside the scope of VAT as well as exempt supplies).

We are a charity, Does MTD for VAT apply to us?

Yes, HMRC confirm that if you are VAT registered and your VAT turnover is over £85,000 then MTD for VAT applies, even for charities. The regulations apply to unincorporated businesses, partnerships, companies, LLPs, trusts, non UK businesses registered for UK VAT and charities.

Are there any exemptions?

Other exemptions are available under the following conditions:

  • Religious beliefs.
  • Reasons of age, disability, remoteness of location or ‘another other reason’ that means it is not ‘reasonably practicable’ to use digital records.
  • A business that is subject to insolvency procedures.
Can I use HMRCs website to file my VAT return after 1 April 2019?

If your business is caught by the regulations, you will need to file your VAT return via MTD compatible software. You will not be able to use HMRC’s website to enter the information

Will there be any change to the VAT deadlines after 1 April 2019?

Your current VAT deadlines will stay the same as will your VAT filing periods. The only change is that the filing process must be performed through MTD compliant software.

What if my VAT return period falls across the deadline of 1 April 2019?

The MTD regulations will apply to your first full VAT period starting on or after 1 April 2019.

Therefore, the following quarter dates will be applicable:

31 March 2019 VAT period end date – the first VAT period under MTD will end 30 June 2019
30 April 2019 VAT period end date – the first VAT period under MTD will end 31 July 2019
31 May 2019 VAT period end date – the first VAT period under MTD will end 31 August 2019

What information does my business need to provide to HMRC following the introduction of MTD for VAT?

The same 9 boxes of information as shown on your VAT return will be required to be sent to HMRC.

Do I need to change my accounting software?

Your accounting software will need to be MTD complaint. In reality this will mean investing in the latest accounting software available, whether desktop or online. We are expecting a significant increase in the use of online accounting software.

Spreadsheets can still be used providing they show a digital record (see below) and you connect them to an Application Programming Interface (API) – that’s a piece of software developed by a third party to enable the VAT return to be submitted digitally. HMRC are encouraging the use of accounting software.

Which software is MTD compliant?

HMRC has a table of software suppliers who have shown a working prototype MTD application them.

This can be found on HMRC’s website under ‘software for MTD’ or by following this link. HMRC recommend that you contact any software provider shown in the table to ensure they will have MTD compliant software. We can advise on suitable solutions.

What records need to be kept in a digital format and what records do I have to keep for MTD for VAT?

VAT Notice 700/22 sets out the records that need to be kept digitally. The VAT notice can be found by following this link. For most businesses this will include

  • Business name
  • Address of your principal place of business
  • VAT number
  • Details of VAT accounting schemes used

Furthermore, the following will need to be kept:

For each invoice or “supply” you make

  • The date of supply
  • The net value of the supply
  • The VAT rate used to calculate VAT.

For each invoice/supply you receive

  • The date of supply
  • The value of the supply including any VAT that is not reclaimable by you
  • The amount of input VAT that you will claim.
How is group VAT affected by MTD for VAT?

All group members will be required to keep digital records with digital links to one member’s MTD-compatible software that then collates the records in order to file with HMRC.

What if I need to make VAT adjustments to my figures in our accounting software?

All adjustments must be made within the accounting software. The adjustment must be recorded as a digital record. Only the total adjustment needs to be kept digitally and not the underlying calculations.

There is a 12 month soft landing period. What does this mean?

HMRC are allowing a grace period of 12 months whereby links between software products will not need to be ‘digital’ links. This is known as the ‘soft landing period’.

Copy and paste does not constitute a digital link but this will be acceptable within the first 12 months.

The exception is data transferred to bridging software for the sole purpose of filing to HMRC via APIs. These links are required to be digital from day one.