11 Interesting Facts - Making Tax Digital

1. What is Making Tax Digital (MTD) for VAT?

MTD for VAT is new legislation that requires all VAT registered businesses with a taxable turnover, above the £85k threshold, to keep their records digitally and submit their VAT Returns using MTD compatible software, such as Xero. Businesses affected by MTD for VAT will no longer be able to use HMRC Online Services.

VAT registered businesses below the threshold can join voluntarily.

2. When does it start?

For the vast majority of businesses it will be the first VAT period starting on or after 1 April 2019. For example, if your VAT Period starts on 1 April then you must keep digital records from that date and submit your next VAT Return using MTD compatible software. If your first VAT period starts on 1 May 2019, then you must start keeping digital records from that date and submit your next VAT Return using MTD compatible software.

You can start earlier if you wish.

3. I’m a business above the VAT threshold. Am I automatically signed up to MTD?

No, you won’t be automatically signed up to MTD for VAT. This is because HMRC needs to verify your information and migrate your record to their MTD system.

You’ll need to sign up your business with HMRC using your existing Government Gateway Login and VAT Number. Once you’ve authorised Xero to connect with HMRC, you’ll be able to submit MTD VAT Returns directly from your Xero account.

HMRC has provided useful guidance on how you do this.

4. As a business do I need to authorise a tax agent to submit VAT Returns on my behalf?

If you want your accountant to submit VAT Returns on your behalf, then you must authorise them to do so. Without the authorisation, they will not be able to access or submit your VAT Returns.

5. How long does it take to sign up to MTD for VAT?

Once you have registered with HMRC, it can take up to 72 hours to receive confirmation from them. When you receive confirmation from HMRC, you will be able to use Xero for your MTD VAT Returns.

Please don’t attempt to submit a VAT Return in Xero before receiving confirmation from HMRC as this will result in an error.

6. When should I sign up to MTD for VAT?

We recommend that you sign up as soon as you can with HMRC, so you’re prepared before you need to be. If you pay HMRC by direct debit you must sign up at least seven working days before your VAT period deadline.

7. Do all businesses with a vatable turnover above the VAT threshold have to join MTD for VAT from 1 April?

The vast majority of businesses will, however there are some that have been deferred until 1 October 2019. HMRC's rules for MTD for VAT provide more details of this.

8. When do I have to submit my first MTD VAT Return?

You’ll have to file your first MTD VAT Return for your first VAT period that begins on or after 1 April.

For businesses that file on a monthly basis, the earliest return has a 7 June deadline. For businesses that file on a quarterly basis, the earliest return has a 7 August deadline.

The exact date will depend on which VAT stagger you’re on. For example, if your first quarterly VAT period begins on May 1, then the deadline for your first MTD return will be 7 September.

9. If I join MTD, can I choose to leave?

No, you cannot leave MTD unless you de-register for VAT – even if your vatable turnover drops below the VAT threshold.

10. I currently submit VAT Returns through Xero, does that mean I’m MTD compliant?

No, if you’ve been submitting VAT Returns through Xero you still need to sign up for MTD with HMRC. Once this is done, you’ll need to authorise Xero.

11. What information is supplied to HMRC under MTD for VAT?

The same information as before – the standard nine box values plus details identifying your business. Additional information might be required in the future, but the details and timings haven’t been specified.