Making Tax Digital for VAT is live. Are you up to date?
9th May 2019
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You may have seen a number of adverts on TV recently talking about Making Tax Digital.

MTD for VAT is now live. Any business with a taxable turnover of £85,000 and above (which is the current VAT registration threshold) must comply with the new rules.

This has raised a number of questions for many businesses, especially those for whom the new rules apply, so Gibbons Mannington Phipps have compiled this useful FAQ summary to help. 


Q: What details must be kept digitally?

A: Under the new rules for MTD for VAT, there are specific records that must now be kept digitally. Not only that, but all future VAT returns need to be submitted directly from digital records via an Application Programming Interface (API).

Returns can be filed from API-enabled spreadsheets, software or bridging software. If you are using more than one software program you will need to ensure that 'digital links' exist between the products.


Q: Is there MTD for VAT software provided by HMRC?

A: No. Although there is no MTD for VAT software provided by HMRC, you can access a list of recognised products on the HMRC encourage all businesses to get in touch with their relevant software provider to establish if there are MTD for VAT products available.


Q: Do I need to sign up to MTD for VAT, or is enrolment automatic?

A: Enrolment is not automatic. You will need to sign your business up to the MTD for VAT initiative. To do this you need the Government Gateway user ID and password for your business, as well as its VAT number. HMRC will confirm via email that your sign-up has been successful once the process has been completed,.


Q: Do all businesses have the same start date?

A: Your start date is dependent on your VAT quarters, so each business has its own date to start using the MTD for VAT system. MTD for VAT rules are compulsory for your first VAT return period starting on or after 1 April 2019, as long as your taxable turnover is over £85,000.

If your business turnover sits below the VAT registration threshold then  you do not need to use MTD for VAT (although you can choose to voluntarily join the scheme).

There are also some additional businesses that have exemption from MTD for VAT. These are:

  • businesses subject to an insolvency procedure
  • businesses run by practising members of a religious society or order with beliefs incompatible with MTD for VAT requirements
  • those that satisfy HMRC that it is not reasonably feasible for them to use digital tools to keep records and submit returns. This can be for reasons of age, disability, remoteness of location or for any other reason.

A small group of taxpayers with 'more complex' requirements have been allowed a significant deferral of 6 months to prepare for MTD for VAT. Those businesses that are subject to the deferral will be required to adopt the MTD for VAT rules for their first VAT return period starting on or after 1 October 2019.


Q: Who is eligible for the deferral?

A: The deferral is applicable to:

  • trusts
  • public corporations
  • not-for-profit organisations not set up as a company
  • VAT groups
  • VAT divisions
  • local authorities
  • traders based overseas. 

The referral also applies to those who must make payments on account, public sector entities required to provide additional information on their VAT return, and annual accounting scheme users.


Q: Can my business leave MTD for VAT if my turnover falls below the threshold?

A: Even if turnover subsequently falls below the threshold, the MTD for VAT regulations specify that once a business is in MTD for VAT it must remain in the scheme.

The MTD for VAT rules will only no longer apply if a business deregisters from VAT or qualifies for exemption.


Q: Is incorrect filing under MTD for VAT subject to penalties?

A: HMRC has stated that there will be a 'soft-landing' period where they will take a more lenient approach to issuing MTD for VAT penalties. This will apply for the first year only.

Penalties will not be issued if businesses don't have digital links between software programs in place for VAT return periods beginning between 1 April 2019 and 31 March 2020. It will still be acceptable to transfer data to HMRC via cut-and-paste. Businesses affected by the deferral have also had the soft-landing period adapted for their purposes, allowing them 12 months to put digital links into place.

Transfer however must be digital where information is transferred from the accounting records into a separate program for submission to HMRC via the API.

Also be aware that the VAT default surcharge regime will operate until 'at least' 2021. HMRC plans to implement a new penalty 'points' scheme for late submission of VAT returns and late VAT payments from this time. 

Complying with the new MTD for VAT rules for your business is crucial.

The team at Gibbons Mannington Phipps are always available to answer any queries you may have. Contact a member of the team for more information.

About the Author


Member since: 22nd March 2018

Cale is the Owner of 'thebestofHastings', the award winning franchise, providing integrated marketing solutions to SMEs, connecting to the Hastings community and promoting local events in 1066 Country....

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