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Making Tax Digital for VAT – Update

After much publicity, Making Tax Digital for VAT finally took effect on April 1st, and the new rules require most VAT registered businesses with a taxable turnover over £85,000 to maintain digital VAT records and to submit their VAT Returns using MTD for VAT compatible software.

However, as with all things tax the devil is very much in the detail, and while MTD for VAT took effect on April 1st what the new rules mandate is that impacted businesses comply with the rules as of their first VAT Return period starting after April 1st.

Another complication is that, at a practical level, once you sign-up for MTD Digital for VAT that’s basically it and all your future VAT Returns need to be submitted using compatible software.

As pointed out by the Chartered Institute of Taxation*, all this has led to some confusion.

For example, let’s say you you are one of the many thousands of VAT registered businesses in Stagger Group 2 and file VAT Returns for the quarters ending April, July, October and January*.

In this case, you might easily assume the new rules require you to submit your April VAT Return using MTD for VAT compatible software. However, you would be wrong. The July return would be the first return you need to submit as the July period is the first period beginning after April 1st.

And, even if you had got this right, you might inadvertently find yourself with an issue by signing-up before you had submitted your April return due on June 7th and suddenly finding yourself needing to submit your April and July returns using compatible software.

As CIOT says: “Getting the timing right to sign up to Making Tax Digital is absolutely vital’.

We agree, and as a business you want to take full advantage of the time you have and not rush into things which can lead to issues and problems if you are not properly prepared.

When it comes to MTD for VAT therefore there are two Golden Rules

  • Take the time to correctly identify the first applicable VAT Return period;
  • Take care when signing-up as this will apply to all VAT Returns still to be submitted

If you need help understanding how Making Tax Digital for VAT impacts your business or particular examples of how the rules apply give us a call on 01225 585 756 or email James at james@whittockconsulting.co.uk. We’d love to help.

* https://bit.ly/2ZVkQF2

* Specifically April 30, July 31, October 31 and Jan 31.