New MTD regulations for VAT

September 22, 2017 | Posted by Sonal Agarwal | Accounting, Business Advice, Taxation, Whitepapers,

HMRC, much to their embarrassment,  had to postpone MTD go live for non-VAT registered businesses in the beginning of this year. However, they are on track with MTD for VAT.

Earlier this month HMRC opened consultation on MTD reforms in VAT. The new measures set out will come into effect in spring next year, most likely without any major changes.  

We summarise here key features of how the VAT procedures will change. 

Will all VAT registered businesses be covered? 

No, only businesses with taxable turnover above VAT threshold currently set at £85,000. This includes zero-rated sales but not VAT exempt sales.  

An exempt business can elect to come in scope of MTD and leave anytime provided their sales do not exceed VAT threshold. 

What will it entail for businesses covered by MTD? 

A business in scope  

  1. Can only submit VAT return with a third party compatible software. They will no longer be able to submit VAT return through HMRC’s site. 
  2. Will be required to keep and preserve VAT records digitally for 6 years. This includes VAT account and information about goods and supplies made and received. Some flexibility will be available for businesses on retail and flat rate scheme to mirror current record keeping requirements. 
  3. VAT account contains totals as reported in VAT return and a summary of adjustments made during the VAT period.  
  4. Business will be encouraged to voluntarily submit additional VAT data (mostly pertaining to adjustments like correction of errors, capital goods scheme adjustments, bad debt relief claims) to facilitate HMRC’s compliance activity at non-compliant businesses. In other words, voluntary disclosure may save you from a VAT enquiry and those not making a disclosure might be targeted for enquiry. 

Is there a major change? 

Not really, MTD returns will be aligned with VAT periods so there will not be additional reporting burden. If you are above VAT threshold, keeping records in Excel may no longer be suitable, although your accountant can always submit the VAT returns through their software. 

Submission of additional information is voluntary. We expect all current software vendors to suitably adapt to incorporate this functionality before deadline (VAT period ending 30th April 2019).  

You will definitely need an accountant to ensure the adjustments are correct and in accordance to UK GAAP and tax laws.  

This  paves way to extend digital record keeping for all businesses and landlords by 2020. More clarification is expected next year. We recommend early adoption of digital record keeping so you have more time to prepare. For more details on how can we help you, please call 01256 406 601.


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