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Making Tax Digital for VAT

Our clients’ most frequently asked questions

18/12/2019
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When registering online for MTD you will need your HMRC Government Gateway ID and password as well as the following, depending on the nature of the entity being set up:
Business  What you will need 
Sole trader National Insurance number
Limited company Company registration number and UTR for corporation tax
Limited partnership
Partnership company registration number, UTR and postcode (where you are registered for Self-Assessment) 
General partnership
Partnership UTR and postcode(where you are registered for Self-Assessment)
Overseas entity  Thosethat do not have a UTR may be required to submit alternate evidence that connects them to their VAT number. For example, their effective date of registration or the value submitted in Box 4 of the most recent VAT return.

What if I can’t comply with MTD?

Any business who is already exempt from online filing of VAT will remain so under MTD. Those who cannot adapt to the new services due to age, disability, location or religion are also able to apply for an exemption.

If it is ‘unachievable and not reasonable’ for your business to have the digital links in place by the MTD hard landing date (1 April 2020 or 1 October 2020), you will need to make a formal application to HMRC as soon as possible for an extension.

For example this could apply for a business that is in the process of updating its IT systems, however the planned implementation date is not before the end of the soft landing period.

What are the soft landing start dates for MTD businesses that have been deferred?

Businesses that benefit from the deferral (VAT groups, entities established overseas etc) will need to be compliant with MTD requirements for digital records from 1 October 2019.

The first MTD VAT return submission will be the first period that starts on or after 1 October 2019 and will depend on your period end:

VAT Periods First MTD compliant period
Deadline 
Mar/Jun/Sept/Dec
Quarter to 31 December 2019 7 February 2020
Jan/April/Jul/Oct  Quarter to 31 January 2020  6 March 2020 
Feb/May/Aug/Nov  Quarter to 29 February 2020
7 April 2020 
Monthly  Month to 31 October 2019  7 December 2019 

For NHS Trusts or government departments, HMRC should have written to inform you that you are not required to join MTD before April 2022.

What digital links are required under the hard landing period?

The VAT return data that comprises the VAT return figures should be able to be followed through digital links. After the soft landing period, copy and paste will no longer be accepted by HMRC as a digital link.

From 1 April 2020 (or 1 October 2020 for deferred businesses) systems must use digital links for any transfer or exchange of data between software programmes.

The type of digital link will depend on the software you use:

  • Bridging software and spreadsheets –digital links can be as simple as having “=Cell reference”.
  • Accounting software –digital links should already be written into the programme.
  • Mix of accounting software and spreadsheets/bridging software –movements of data between the two will need to be digital e.g. through downloads rather than manual copy and paste or manual entry of numbers.

What is bridging software?

Bridging software can be used solely as a ‘bolt on’ to accounting software in order to submit VAT information digitally. It can also be used to keep digital records and then directly submit the required VAT information digitally to HMRC.

HMRC have produced an extensive list of bridging software providers which can be found on gov.uk. Whilst there are a number of free bridging software options, users should be cautious as to what protection they have should there be any issues with the software during submission and the extent to which the software supplier is accountable.

What is the process for VAT Groups?

VAT groups are still only required to submit the 9 VAT return boxes to HMRC using MTD. How the VAT returns are prepared for a VAT group will depend on whether VAT group members use the same accounting package and /or if preparation of the VAT returns is centralised.

Possible ways to prepare the VAT return are:

  • Export all data from group members’ software into excel and combine the figures digitally to create a VAT group return. This could either be returned back to the accounting system for submission, or could be linked to bridging software for submission to HMRC.
  • Collate the VAT return workings for each member within the accounting system to generate the group VAT return that is then submitted to HMRC.

Please contact us if you would like to discuss any of these issues and your VAT planning.

Watch our webinar providing you with the additional MTD rules, and what you need to do to be ready for the impending deadlines.

Contact us

Robert Warne
Rob Warne
Partner, Head of VAT and Customs Duty services
London
Robert Marchant
Robert Marchant
Partner, VAT and Customs Duty services
London