typing on laptop

MTD for VAT deadlines: business owners and landlords

Keri Pay, Partner, VAT
28/02/2019
typing on laptop
Making Tax Digital (MTD) is the first stage of HMRC’s plan to modernise the UK taxsystem.

From 1 April 2019, affected organisations will have to:

  • sign up for HMRC's new ‘Digital Services Account’
  • keep their VAT records digitally (i.e. using accounting software or a spreadsheet)
  • submit their VAT data to HMRC through compatible software, not through the HMRC online portal as you do now.

 Act now: tax planning opportunities

  ►  Changes to Entrepreneurs' Relief
  ►  Key tax considerations for Trustees
  ►  Year-end tax planning opportunities for individuals
  ►  Tax planning for residential property owners
  ►  Profits for business owners and their families
  ►  Tax facts: Resident and non-domiciled individuals

Does it apply to you?

Any Taxable Person with VATable turnover above the VAT registration threshold will need to submit their VAT returns under MTD.

Taxable Person includes trading businesses, as well as commercial landlords and pension schemes with commercial property who have opted to tax.

HMRC has announced a six-month deferral for organisations including:

  • Trusts (i.e. organisations legally set up as a Trust, not those with 'Trust' in its name)
  • 'not for profit' organisations that are not set up as a company
  • VAT groups
  • those required to make payments on account
  • those who submit under the ‘annual accounting scheme’ (i.e. submit one return covering a twelve month period).

Organisations qualifying for deferral will need to comply with MTD from 1 October 2019.

Will changes to my processes be required?

In all cases, the requirement to submit digitally will require a change to your current VAT accounting. 

The first change is that affected organisations will need to sign up for HMRC's new 'Digital Services Account'. This will replace the former Government Gateway for VAT return submission.

Part of the VAT information will need to be extracted, and submitted to HMRC digitally, either using accounting software, or a spreadsheet with functionality to submit directly to HMRC (called an ‘API enabled spreadsheet’ or ‘bridging software’).

Which is my first VAT return that will be affected by MTD?

The first VAT return that requires completing under MTD will be for the first period commencing after 1 April 2019 i.e. the first quarter returns to June 2019, July 2019 and August 2019.

From 1 April 2019 (or 1 October 2019 for deferred organisations), HMRC will be operating a ‘soft landing’ approach.

What information do I need to provide?

The requirement to keep VAT records ‘digitally’ means that it will no longer be acceptable to use a ‘cash book’ or similar manual bookkeeping. Your records will need to be kept on an accounting software package, or in a spreadsheet, or similar.

<>Under the 'soft landing' period full digital record keeping is not required (i.e. the backing VAT information to HMRC is not required to be linked to the submission data). 

From 1 April (or October) 2019 it is only necessary to submit the 9 summary boxes you submit presently, together with other information to identify the organisation and VAT quarter. 

The requirements are that the VAT return submission must be done via a digital link, rather than through the online portal.

The requirements are that the VAT return submission must be done via a digital link, rather than through the online portal.

Is a software update required in order to be compliant?

It is not necessary to have the most up-to-date, or an ‘MTD Ready’ software version in order to be compliant for MTD.  It is possible to submit VAT returns outside of your accounting software (i.e. using a spreadsheet).  The only requirement is that the return is submitted digitally.

Are there any exemptions?

Organisations which have VAT registered voluntarily i.e. have registered for VAT but their VATable turnover is less than £85,000, are not required to submit digitally.

This is the first step in HMRC’s plan to modernise the tax system. It has yet to be decided when MTD will be extended to non-VATable businesses but this is in the pipeline. If you have any concerns about MTD and your new filing obligations please get in touch with your usual Crowe contact.

Contact us

Our national private clients team provides specialist tax advice to some of the most successful individuals and families in the UK. We understand that absolute discretion is essential and take pride in building long-term relationships with our clients. Get in touch with us today.
Keri Pay
Keri Pay
Partner, VAT
Midlands/Manchester