Making Tax Digital for VAT is live – ignore at your peril!

VAT registration is compulsory for those businesses with taxable (‘VATable’) income (also referred to as turnover or sales) in excess of the VAT threshold, currently £85,000. 

With the exception of organisations listed in HMRC’s ‘deferral group’, from 1 April 2019 VAT registered businesses with VATable income above the current VAT threshold of £85,000 are required to:

• Keep digital VAT records: maintain accounting records digitally in a software product compatible with ‘Making Tax Digital (MTD) requirements 
• Sign up for ‘Making Tax Digital’ with HMRC – a registration number is required to access the HMRC MTD portal (please note that this should be done at least 7 working days prior to your VAT return submission date)

Once signed up to MTD, VAT returns should be submitted to HMRC via the MTD portal using a ‘functional compatible software product’, for example Xero, that can access HMRC’s new API (Application Program Interfaces) platform.

MTD requirements are not yet mandated for organisations who have registered for VAT voluntarily and whose VATable income remains below the VAT registration threshold of £85,000, however, you can elect to comply with the requirements should you wish.

HMRC’s historical online VAT return portal will remain available to businesses that are not within the scope of MTD for VAT.

If an organisation not registered for VAT exceeds the VAT registration threshold after 1 April 2019, they will need to register for VAT and sign up to MTD – HMRC has set a 30 day window to complete this process!

If not done so already, businesses within the MTD scope will need to acquire suitable software and/or appoint an agent to submit returns to HMRC on their behalf. 

At Armstrong Watson, we pride ourselves on the relationships we develop with our clients and can offer a bespoke VAT service to meet your business needs. Outlined below are examples of the service levels we can provide to support you:

• Level 1 – we provide a cloud accounting platform (Xero) which is MTD compliant
• Level 2 – we provide a cloud accounting platform (Xero) which is MTD compliant and will review your VAT return prior to submitting it to HMRC on your behalf
• Level 3 – we will provide a full outsourcing service to you including bookkeeping, VAT return preparation and submission to HMRC on your behalf

Deferral Group – who must follow the rules for MTD from 1 October 2019?

You might be in the ‘deferral group’ and must use software to keep digital VAT records from your first VAT Return period starting on or after 1 October 2019 if your business:

• has a taxable turnover over £85,000
• is part of a VAT group or VAT division
• is a trader based overseas
• is a trust
• is a ‘not for profit’ organisation that is not set up as a company
• uses the annual accounting scheme
• is a local authority
• is a public corporation
• has to make payments on account
• uses the VAT GANT service

HMRC will send you a letter to tell you that you’re in the deferral group.