Making Tax Digital for VAT

I've heard various different things about how to work out whether my clients are caught by the new Making Tax Digital (MTD) requirements for VAT from April 2019. Can you explain how I determine which businesses are caught?

In essence, all businesses with UK taxable supplies in excess of £85k per annum will be caught by MTD. This means UK based businesses that are compulsorily UK VAT registerable plus any non-UK based businesses that are both compulsorily registerable (as Non-Established Taxable Persons / NETPs) and have a UK taxable turnover in excess of £85k per annum. 

‘UK taxable supplies’ means all income that has a UK place of supply and is subject to UK VAT at the zero, reduced or standard rate. It also includes ‘deemed’ supplies, for example where a UK business receives services from overseas that would have VAT on if bought from a UK supplier (commonly referred to as reverse charge services). 

If a business was compulsorily registerable in the past, but is now below the threshold and has chosen to stay VAT registered, it will not be caught by MTD unless or until its UK taxable turnover exceeds £85k on or after the MTD go live date. Once a business is caught by MTD however, it cannot leave even if it subsequently drops below the £85k (although it could of course deregister then it would not need to do VAT returns at all).

While we have no indication that MTD will be delayed for everybody, it has recently been delayed by six months for certain businesses with more complex VAT accounting needs. These are: 
  • trusts
  • ‘not for profit’ organisations that are not set up as a company
  • VAT divisions
  • VAT groups
  • public sector entities required to provide additional information on their VAT return (Government departments, NHS Trusts)
  • local authorities
  • public corporations
  • traders based overseas
  • those required to make payments on account 
  • annual accounting scheme users. 

These businesses will therefore start on MTD (assuming their UK taxable supplies are over £85k) for VAT return periods starting on or after 1 October 2019.

All other businesses caught by MTD should assume it will be going ahead as planned and therefore they need to be ready for their first VAT return period starting on or after 1 April 2019.
Found in: VAT
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