VAT and Making Tax Digital

11th Dec 18

MTD  – Making Tax Digital

From 1st April 2019, all businesses above the VAT threshold will need to keep their records digitally with MTD (making tax digital) software creating their returns. (Unless they meet the criteria for 6-month deferral.)  https://www.gov.uk/guidance/software-for-sending-income-tax-updates#VAT    lists software available now.

Deferral

The 6-month deferral applies to customers who fall into one of the following categories: trusts, ‘not for profit’ organisations that are not set up as a company, VAT divisions, VAT groups, those public sector entities required to provide additional information on their VAT return (Government departments, NHS Trusts), local authorities, public corporations, traders based overseas, those required to make payments on account and annual accounting scheme users. The deferral will apply to around 3.5% of mandated customers. https://www.gov.uk/government/publications/making-tax-digital/overview-of-making-tax-digital

VAT notice 700/22 making tax digital lays out the regulations for MTD. (https://www.gov.uk/government/publications/vat-notice-70022-making-tax-digital-for-vat/vat-notice-70022-making-tax-digital-for-vat ).

Software Required

Under MTD, businesses will no longer be able to keep manual records and will need to submit returns by compatible software only.  Businesses using a spreadsheet will need bridging software or API enabled spreadsheets to submit returns. An application program interface (API) is a set of routines, protocols, and tools for building software applications. Basically, an API specifies how software components should interact.  Google Spreadsheets is web-based and is easy to use the Google Spreadsheet API to access any Spreadsheet in a Google account, which will generate a web API interface that will allow reading or writing to a spreadsheet data source via a public, or privately secured API.

Exemptions

The following are exemptions from MTD for VAT:

Religious beliefs are incompatible with the use of electronic communications

It is not reasonably practical due to age, disability, remoteness of location or other reason.

The business is subject to an insolvency procedure.

A business is voluntary registered and trading under the VAT threshold (but if the taxable turnover falls below the VAT registration it must still comply with MTD requirements for VAT until deregistration).