HMRC VAT Notice 700/22, published 13 July 2018, provides detailed information about the changes in VAT from April this year, which amend the VAT Regulations 1995.

What is changing?
Application of MTD compatible software to

  • Keep digital records
  • prepare the VAT return
  • send and receive information to HMRC from API (Application Programming Interface) enabled software

Who is affected and when? - From April 2019 - Most VAT Registered Businesses with turnover above the the VAT threshold (£85,000) from the first VAT period on or after 1st of April 2019. For example: Return covers 1 of March to 31 of May Start MTD - 1 June 2019 First MTD Return- due 7 October 2019

MTD is voluntary for the VAT businesses £85,000

Businesses below the VAT threshold will not be affected but can use portal

Monthly check turnover previous 12 months

Once a business is mandated they stay in MTD even if the Taxable Turnover Drops below the threshold.

Exemptions Apply if:

  • MTD is already in place
  • in case of Insolvency
  • On Religious grounds
  • MTD is "Not reasonably practicable"

Functional Compatible Software MTD compliant are QuickBooks, Xero, Sage but it also includes spreadsheets. Spreadsheets may however need bridging software that will enable electronic or digital transfer of data between software programs, products, or applications.

So, no more manual intervention or retyping information from one product to another. No copying and pasting.

Digital link does include XML import or export and macros and linked cells in spreadsheets.

What is the soft landing? An extra year for businesses to arrange for digital links between parts of their software (April 2010)

To choose software

  • Speak to your existing provider
  • Seek advice from professional body
  • Have a look on GOV.UK
  • Run Internet search # MTD

Records that must be kept digitally For each supply you make you must record the:

  • time of supply (tax point)
  • value of the supply (net value excluding VAT)
  • rate of VAT charged

For each supply you receive you must record the:

  • time of supply (tax point)
  • value of supply
  • amount of input tax that you will claim

To support each VAT Return you make, your functional compatible software must contain:

  • the total output tax you owe on sales
  • the total tax you owe on acquisitions from other EU member states
  • the total tax you are required to pay on behalf of your supplier under a reverse charge procedure
  • the total input tax you are entitled to claim on business purchases
  • the total input tax allowable on acquisitions from other EU member states
  • the total tax that needs to be paid or you are entitled to reclaim following a correction or error adjustment and
  • any other adjustment allowed or required by VAT rules

A total of each type of adjustment must be recorded as s separate line

Invoices must still be kept in paper or electronic form

By law must some records be in their original form

MTD Timeline

1 April 2019 - Making Tax Digital mandated for all customers (except for those that have been deferred)

October 2019 - Making Tax Digital mandated for customers that have been deferred

Spring 2019 - Pilot opens for customers that have been deferred

Getting ready - practical steps Have a look at the timeline and think about your business

  • When can you join the pilot?
  • When are you mandated to start MTD?
  • How much work has to be done to be ready?

More information can be found on GOV.UK

Start to keep digital records

Making Tax Digital for Business - Your Tax Assistant

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