Making tax digital for VAT. Will it apply to me? Am I exempted? Am I deferred. Do I need new software to file VAT returns online?

Under Making Tax Digital (MTD) for VAT, known as 'Making VAT Digital' (MVD), most VAT registered businesses will have to report VAT in new way.

This tool aims to guide you through the requirements to see whether you will have to update your software or systems in order to file VAT returns under the MVD rules from April 2019.

Let's get started:

VAT registered?
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Is your business registered for VAT?

Making tax digital for VAT will not apply to you.

If you are unsure as to whether you should be registered see Registering for VAT

Is you turnover exceeding or going to exceed the £85,000 threshold?
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Will your taxable supplies exceed the VAT registration threshold in any 12 month period ending on or after 31 March 2019?

How do I calculate turnover for MVD purposes?

  • At the end of each month you will calculate your turnover for the previous 12 months by adding together supplies you made with a UK Place of supply of goods or UK Place of supply of services that are:
    • Zero-rated supplies
    • Reduced-rated supplies
    • Standard rated supplies.
  • Do not include any supplies that have a place of supply outside the UK or that are exempt from VAT.
Useful reading: VAT registration: Historic turnover test

You have two options:

  • Continue to enter your VAT via the Government Gateway, or
  • Opt into making VAT digital and use functional compatible software to submit your VAT return to HMRC.

Don't forget to watch your turnover: if it exceeds £85,000 it will be compulsory to join making VAT digital.

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Are you digitally excluded on religious grounds
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Are you excluded from VAT online filing due to the fact that you are a practising member of a religious society or order whose beliefs are incompatible with the use of electronic communications?

Are you excluded due to insolvency?
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Has an insolvency procedure commenced in relation to your business under section 81 (4B), (4C), and (5) of the VAT Act 1994?

Can you claim any other digital exclusion?
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Is it not possible to make a return using a compatible software return system for reasons of disability, age, remoteness of location, or any other reason?

In order to claim that you are digitally excluded you will need to show/prove to HMRC that you:

  • Do not have broadband or internet access
  • Have very limited use of the internet
  • Are not a user of other forms of software
  • Are too old or ill or have some other reason why you are unable to deal with the technical challenge of making VAT digital.

You may also have to have a very good reason for not being able to delegate your filing responsibilities to an agent or adviser.

Each case will need to be decided according your individual circumstances. Possible reasons why you are unable to delegate might be along the lines of the following excuses:

  • You do not have the means to engage someone else to file VAT online on your behalf
  • You have difficulty engaging with others.

All in all, it is difficult to claim digital exclusion if you have already been filing VAT returns using HMRC's portal. If you have problems we recommend that you talk to your accountant or adviser and get assistance.

If you need to find a suitable adviser, then contact the Virtual Tax Partner support service: we will put you in touch with an accountant or adviser who is local to you.

In order to claim that you have a religious exclusion from making VAT digital you will either:

  • Be already excluded from online filing due to your current practicing beliefs (as already notified to HMRC), or
  • You will need to show/prove that you have become a practising member of a religious society or order whose beliefs are incompatible with the use of electronic communications

It will not be easy to make any claim if you are already a user of other forms of software

You will also have to have a very good reason for not being able to delegate your filing responsibilities to an agent or adviser

You should check whether an exclusion applies with the insolvency practitioner who is dealing with your case.

Are you one of the following?
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  • A Trust
  • A 'Not for profit’ organisation that is not a registered company
  • A VAT division
  • A VAT group
  • A public sector entity required to provide additional information on their VAT return (Government department, NHS Trust, local authority)
  • A Public Listed company (PLCs)
  • A Trader based overseas
  • A person who is required to make payments on account for VAT
  • An annual accounting scheme user

Currently it looks as if HMRC's proposals for Making tax digital for VAT will apply to you.

This means that from 1 April 2019 you must:

  • Keep your bookkeeping records for VAT digitally

For VAT periods ending on or after 1 April 2019:

  • You will no longer be able to use HMRC's portal to submit your VAT return
  • You must submit your VAT return information to HMRC through MTD functional compatible software
  • The initial requirement is that your software just has to submit the nine totals on the VAT return to HMRC.

From 1 April 2020

  • You will be required to use digitally linking software where you use two or more software packages to record your transactions for VAT. The idea is to avoid any manual keying in or 'cut and paste' from one record to another. Eventually, this will also allow HMRC to check that there are no gaps or unexpected variances in your data.
  • A new points based penalty system will apply for late filing non-compliance

Further information & assistance:

See Making VAT digital for more information, if you need it.

Try this if you need Links to software for MVD

If you need a person to help, then contact the Virtual Tax Partner support service: we will put you in touch with an accountant or adviser who is local to you.

Exemption from any of HMRC's making VAT digital requirements has to be formally agreed by HMRC.

You will need to write in to your VAT office and make your case.

HMRC's research in 2015 noted that 15% of the population are digitally excluded and 37% require extra assistance in using digital channels

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  • HMRC deems you to be a VAT-registered business with complex reporting requirements.
  • You are not being mandated into MVD until 1 October 2019.

This date may change, it depends on the results of testing (the MVD pilots).

You are expected to be able to join a pilot scheme by Spring 2019.

See Making VAT Digital: a detailed subscriber guide

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  • Exemption from any of HMRC's making VAT digital requirements has to be formally agreed by HMRC.

  • You will need to write in to your VAT office and make your case.

  • You will need to supply evidence: your insolvency professional should be able to assist you with this.

See Making VAT Digital: a detailed subscriber guide

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