HM Revenue and Customs (HMRC) has today published further information on Making Tax Digital (MTD) to support businesses and agents in the run up to the start of the mandatory MTD VAT service from April 2019.
As part of MTD, businesses registered for VAT with a taxable turnover above the VAT registration threshold of £85,000 will need to keep VAT records digitally and file their VAT returns using MTD compatible software. This will start from their first VAT period starting on or after 1 April 2019.
Businesses with a taxable turnover below the VAT threshold will not have to operate MTD, but can still choose to do so voluntarily.
Who needs to follow the MTD rules and from when.
The digital records businesses must keep, and a series of HMRC directions that relax these requirements in certain circumstances (such as where a mixed rate supply is made, where a third party agent makes or receives supplies on behalf of a business, and where a business uses a special VAT scheme such as a retail scheme or the Flat Rate Scheme).
How businesses must use software to keep digital records and file their returns from those digital records, including information on when programs do and do not need to be digitally linked in situations where a combination of software programs is used. Given VAT registered businesses and their tax agents already use a wide variety of different systems and programs to produce their VAT returns, the notice includes a number of illustrated examples to show customers how to ensure their specific set up will be compliant with the regulations from April 2019.
Example 1 - Existing business with taxable turnover above the VAT registration threshold on 1 April 2019
A business submits a quarterly return covering the period 1 March to 31 May 2019. The business taxable turnover exceeds the VAT registration threshold and therefore the business will need to comply with Making Tax Digital rules for the period starting 1 June 2019.
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