Who, When & Exemptions?
The MTD for VAT requirements will apply to all VAT registered businesses and organisations with turnover above the VAT threshold of £85,000.
This includes unincorporated businesses, partnerships, companies, LLPs, trusts, non-UK businesses registered for UK VAT and charities.
VAT registered businesses with turnover below the VAT threshold can opt in to MTD and file their VAT returns using MTD compatible software but there is no obligation to do so.
Calculating taxable turnover
When working out taxable turnover you should:
- include standard rated, reduced rated and zero-rated supplies; and
- exclude outside the scope and exempt supplies.
The relevant period to be considered when determining whether the MTD for VAT requirements apply is the same rolling 12 months that applies when considering whether a business must compulsorily register for VAT, but there is no rule that looks forward. When MTD for VAT starts you consider the 12 months to the business’ potential start date for MTD for VAT when deciding whether the requirements apply.
Voluntarily registered businesses that have not opted into MTD for VAT, will need to continue to monitor their turnover to establish when they need to start complying with the MTD for VAT requirements. Businesses that newly register for VAT (compulsorily) will need to consider how they will comply with the MTD for VAT requirements and will have very limited time in which to comply.
Once a business is required to comply with the MTD for VAT requirements, the obligations continue, even if the turnover of the business subsequently drops below the VAT threshold.
An exemption for the digitally excluded is included in the regulations and mirrors the current exemptions from online filing for VAT. The exemptions cover those that that do not use computers for religious reasons and those that are unable to comply because of age, disability or location (or for any another reason).
Existing exemptions from online filing for VAT are expected to be carried over automatically to MTD for VAT. Those that are not currently exempt from VAT online filing may find it difficult to persuade HMRC that the exemption should apply. Difficult cases will arise, particularly where an individual has some basic digital skills such as being able to send emails, but would not be able to cope with accounting software or a spreadsheet. There is no specific age at which the exemption applies; each case will be taken on its merits. Location covers those who cannot obtain access to broadband because of where they are located. The exemption will not apply to those who could sign up for broadband but have not done so.
HMRC is expected to issue further guidance on how to apply for exemption; the current process is to phone the VAT helpline or make a written request
You will need to ensure you are on MTD-compatible software by 1 April 2019 ready to submit your first VAT return on the following guidelines.
VAT Return Quarters
- Ending 31 March, 30 June, 30 September, 31 December = 1 April 2019 therefore first quarter is 30 June 2019
- Ending 30 April, 31 July, 31 October, 31 January = 1 May 2019 therefore first quarter is 31 July 2019
- Ending 31 May, 31 August, 30 November, 28 February = 1 June 2019 therefore first quarter is 31 August 2019
For more information on making tax digital please contact Emma Hardwick from our Plus Advisory team.