Beware impact of VAT MTD

Written by Annie Lee on 6 June 2018

HMRC announced in July 2017 that Making Tax Digital (MTD) will be postponed for a year for all taxes except for VAT. MTD will affect all VAT-registered businesses with a taxable turnover above the VAT registration threshold for VAT periods beginning on and after 1 April 2019.

Businesses below the VAT threshold will not be required to submit their VAT figures to HMRC by way of MTD and will be able to continue using the existing portal system. VAT registered businesses may opt in and use MTD, but if their taxable turnover falls below the VAT threshold, there is no way to opt out of MTD.

Taxable turnover does not include exempt supplies or turnover outside the scope of UK VAT. Businesses, especially that of property development, must be minded of the long lead time until the business is required to use MTD. In their case, sales are generally not made until close to or end of completion, so MTD will be required after they make sales.

As the name suggests, records have to be digital; manual record keeping will no longer be accepted by HMRC. However, spreadsheets are regarded as digital records.

HMRC will accept spreadsheets provided there is some form of bridging to HMRC’s system via Application Programme Interface (API). This will also apply to all accounting software packages and again the software will be required to connect to HMRC’s system.

There is significant change in the VAT record keeping rules. There is an appendix attached to HMRC’s draft notice. Businesses should take note of the requirements and the data that must be held by the business to be compliant with HMRC or be faced with penalties.

HMRC’s draft guidance on MTD is available on its website ( The notice contains eight pages which seems insubstantial given MTD is a significant change to the whole tax reporting system. A pilot system was rolled out in February 2018.

The ICAEW Tax Faculty has been working hard with HMRC and putting forward ICAEW members’ questions and concerns. Follow the latest development.

Annie Lee Profile
Annie Lee
Corporate Client Director