MTD for VAT – Your questions answered

MTD for VAT – Your questions answered

As I wrote in this blog post last year, the impending introduction of Making Tax Digital (MTD) ought to be viewed as an exciting development – and not something to be feared. All being well, it should streamline tax administration, minimise errors, and give business owners access to up-to-date and accurate numbers.

And it all kicks off this coming April with MTD for VAT. So, if your VAT-registered business has a turnover above the VAT threshold of £85,000, you will be required to partake. Your records will need to be digitally stored, and your returns will need to be submitted via MTD-compatible accounting software.

But I know it hasn’t all been plain sailing. Many of you still have questions, and the good news is, I have answers.

When does MTD for VAT start?

If your business falls under the scope of MTD for VAT outlined above, you will have to make your first submission via MTD compatible software on or after the 1st of April 2019. However, if your VAT accounting period spans that start date, you will be required to submit your nextVAT return via MTD compatible software.

For instance, if your VAT quarter starts in March and ends in May 2019, you won’t be mandated to use MTD until the end of your following quarter in August 2019.

Will my VAT deadlines stay the same?

Yes indeed! The dates for submission and payment remain unchanged. It’s just the manner in which you file your VAT returns and how you store certain pieces of information that will change from April 1st.

What information do I need to submit and store digitally?

The good news is, the type of information you need to submit on your VAT return hasn’t changed either. It’s still those same nine boxes:

  1. VAT due in the period on sales and other outputs
  2. VAT due in the period on acquisitions from other member states of the EU
  3. Total VAT due
  4. VAT reclaimed in the period on purchases and other inputs (including acquisitions from the EU)
  5. Net VAT to pay to HMRC or reclaim
  6. Total value of sales and all other outputs excluding any VAT
  7. Total value of purchases and all other inputs excluding any VAT
  8. Total value of all supplies of goods and related costs, excluding any VAT, to other EU member states
  9. Total value of all acquisitions of goods and related costs, excluding any VAT, from other EU member states

However, you should note that, to remain compliant with MTD, you will need to digitally and securely store certain records. This should include:

  • Your VAT registration number;
  • Your registered business name and address;
  • A record of any VAT schemes used.

For each supply made, you must store:

  • Date of supply;
  • Value of the supply;
  • Rate of VAT charged.

And for each supply received, you must store:

  • Date of supply;
  • Value of the supply, including any VAT that cannot be reclaimed;
  • Amount of input VAT to be reclaimed.

Once again, all of this is information that’s already required when submitting a VAT return. All that’s changed is the need to store it digitally. That means moving away from spreadsheets and embracing the cloud, with most leading cloud accounting software platforms storing this information as standard.

Here’s the HMRC list of all MTD for VAT compatible software solutions.

What if my turnover falls below the threshold after joining MTD?

If your turnover falls below the threshold for a period after you’ve joined MTD, you will still be required to follow its rules until such time as you deregister from VAT.

The clock is ticking, but there’s still time to get ready for MTD for VAT!

If you’re not yet using an MTD compatible cloud accounting software platform such as QuickBooks Online, Xero, KashFlow, or ClearBooks, there’s still time to make the switch.

Making Tax Digital is happening, whether you like it or not, so don’t delay; start getting ready today! 

Need some help with MTD for VAT? Get in touch to find out more.