Sorry. You need to upgrade your browser

You are using Internet Explorer 8

This is considered an out of date browser. This website has been developed with modern browsers in mind to allow it to display at its best in a wide variety of viewing situations - including mobile viewing. But we haven't supported older browsers like IE8. Please upgrade to the latest version of Internet Explorer - or try Mozilla Firefox or Google Chrome. Both are excellent browsers.

Thank you.

Chartered Certified Accountants
and Business Advisors

01530 267320

Making Tax Digital for VAT

Exemptions

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:

  • Which satisfy HMRC that they are practising members of religious society or order whose beliefs are incompatible with the use of electronic communications
  • To whom an insolvency procedure applies
  • Which satisfy HMRC that for reasons of disability, age, remoteness of locations or any other reason, it is not reasonably practicable for them to make a return using an electronic return system.

If HMRC are not satisfied that the person is exempt for any of the above reasons, they will provide digital assistance.

Preservation of records

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.

Content of records

The information to be kept and preserved digitally includes;

  • ‘designatory data’: this is business name, principal place of business, VAT registration number, information about any VAT accounting schemes used
  • VAT account linking primary records and VAT return
  • Information about supplies make and received

The VAT account

The following data will be kept digitally.

VAT payable portion:

  • Total output tax due for VAT return period
  • Total output tax on acquisitions from other EU member states
  • Total output tax on supplies received where the business is required to account for and pay on behalf of the supplier (reverse charge output tax).

VAT allowable portion:

  • Total input tax allowable for VAT return period
  • Total input allowable on acquisitions from other EU member states

Adjustments:

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.

Exemptions

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.

VAT schemes

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.

VAT returns

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.

Error corrections

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.

Latest news

Employee Tax Relief on Business Expenses

HMRC is keen for employees to know that there is no need to use a professional claims company if they want to claim tax ...

Click to read more >

Your ongoing responsibilities for Payroll

Automatic Enrolment is a continuing process for employers " it doesn’t end once you have put your staff into a workp...

Click to read more >

Making Tax Digital (MTD) Important Information

From 1 April 2019, when all VAT registered businesses (with a taxable turnover above £85,000) will be required to keep ...

Click to read more >

Setting up as a Sole Trader

A Sole Trader means you are a one-man-band as self-employed. You don’t have a boss! When earning as a Sole Trade, a...

Click to read more >

Childcare Vouchers Scheme is now closed!

From 4th October 2018 the childcare voucher scheme is closed to new entrants, meaning those employees who are not regist...

Click to read more >

How can we help?

 

Submit

Testimonial

Jake's support has been essential.

Carol Brookes
Able 2 Consulting LImited

Click to read the full testimonial >