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HMRC has published VAT Notice, 700/22: Making Tax Digital for VAT, which sets out who needs to follow the MTD rules, what records need to be kept, and what agents need to do.

The new VAT Notice does not currently include the latest timetable changes announced by HMRC in October 2018. MVD is deferred by six months for complex VAT businesses. See Making VAT Digital: New Timetable

Updates to Notice 700/11

In May 2019 HMRC added further guidance on the use of supplier statements, petty cash transactions and charity fundraising events (see Digital record keeping below).

MTD for VAT is due to commence from 1 April 2019. The new Notice provides the following information:

Who needs to follow the MTD for VAT rules?

Example 1 - Existing business with taxable turnover above the VAT registration threshold on 1 April 2019

A business submits a quarterly return covering the period 1 March to 31 May 2019. The business taxable turnover exceeds the VAT registration threshold and therefore the business will need to comply with Making Tax Digital rules for the period starting 1 June 2019.

Example 2 - Business with a taxable turnover above the Making Tax Digital threshold at the point they need to register for VAT

A business that is not registered for VAT is required to register from September 2019 because the taxable turnover over the previous 12 months has exceeded the VAT registration threshold. The business must follow the rules in this notice for all VAT Returns they are subsequently required to make as their taxable turnover was above the VAT threshold when they were required to register.

Example 3 - VAT registered business with taxable turnover below Making Tax Digital threshold until November 2019

A business is registered for VAT but its taxable turnover is below the VAT registration threshold until November 2019. The business must follow the rules in this notice for any VAT period that starts on or after 1 December 2019 as its taxable turnover now exceeds the VAT registration threshold.

Digital record keeping

The following data must be kept digitally:

Example 1

A partly exempt business software allows it to record amounts of VAT relating to both exempt and taxable supplies. At the end of the period they complete a partial exemption calculation and put the adjustment into their return. The calculation is not completed in the software. The business does not have to go back and change each line in the software to reflect the amount of recovery on each invoice.

Example 2

A business has a software package that requires a period to be closed before the return can be completed. After the period has been closed the business is calculating adjustments before submitting the return. Invoices are found that should be included on the return. The business can enter the figures as an adjustment to ensure the return is correct, but they must record the invoices in their functional compatible software to complete their digital records.

This relaxation only varies the requirements on maintaining records using functional compatible software. It does not change any other record keeping requirements set out in VAT legislation.

Example 3

A business notices an error in its records. The total value of the error is £65,000 so the business must correct the error using error correction method 2. The business does not have to make any changes in its functional compatible software, but must keep all records as normal.

This relaxation only varies the requirements on maintaining records using functional compatible software. It does not change any other record keeping requirements set out in VAT legislation.

Additional guidance May 2019:

Supplier statements:

Petty cash:

Charity fundraising events

Agents

Other information

Links

Making Tax Digital: VAT

MTD: toolkit for accountants

Making Tax Digital: index

External links

HMRC VAT Notice, 700/22: Making Tax Digital for VAT