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Just as there are exemptions from electronic filing at present, there are some exemptions from the MTD for VAT regime, and these follow the same lines. They are for businesses:
If HMRC are not satisfied that the person is exempt for any of the above reasons, they will provide digital assistance.
As well as keeping digital records, businesses will have to preserve them in a digital form. They will have to preserve digital records in ‘functional compatible software’ for up to six years. Where a business deregisters for VAT, it will have to preserve the records for up to six years.
Businesses to which MTD no longer applies will not have to maintain ongoing records in digital format.
The information to be kept and preserved digitally includes;
The following data will be kept digitally.
VAT payable portion:
VAT allowable portion:
Adjustments made, corrections of errors in calculating VAT payable in previous periods, and any other adjustments made as required by VAT rules (such as retail scheme annual adjustments or partial exemption annual adjustments).
Here however, it is only the total of each adjustment that needs to be kept digitally – not the underlying calculations.
Where HMRC are satisfied that keeping and retaining the specified information for each transaction is ‘likely to be impossible, impractical or unduly onerous,’ they can vary the detail required to be kept electronically.
The notice also includes some relaxations for recording sales and purchases made third parties; it will be possible to enter the totals on the third party’s sales summary as one single transaction.
Retail scheme users will be allowed to record electronically sales transaction data based on daily gross takings, rather than recording details per sale.
Flat rate scheme users will need to record the relevant information in digital form, but the extent of the records will mirror current record keeping requirements.
There will be a minimum of nine boxes to complete the return. The information on the return will ‘be generated by pulling information from the digital records’ – a hands-free process.
There is also provision for businesses to make voluntary ‘periodic updates’ – in other words, for them to supply information outside the VAT return cycle.
The exact position is not yet completely clear, but HMRC say ‘We expect a voluntary update outside of the VAT Return cycle to be used mainly when a business is also providing an Income Tax update’. This presumably looks forward to a next stage in MTD for Business, when the regime also encompasses income tax. HMRC then goes on to say, ‘But it could also be used for example to update HMRC about a change of circumstances (changes to ‘designatory data)’.
If a business chooses to do so, they can submit supplementary data when submitting their VAT return. The supplementary data will contain a breakdown of the box 6 outputs figure, showing the period totals of standard rate, reduced rate, zero rate, exempt and outside the scope transactions.
HMRC have also stated that, should they select a business for an enquiry, they may look at any supplementary data submitted by the business. This data may satisfy HMRC that they do not need to contact the business after all.
The procedure here will broadly be the same as at present with regard to amending VAT accounting records. Corrections to VAT returns already submitted will be made as at present, with non-deliberate errors below the reporting threshold adjusted on the next VAT return, (if within the four year time limit) and other errors reported through VAT652.
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