MTD for VAT
HMRC has changed the way you submit VAT Returns on behalf of your clients. From the first VAT period starting on or after 1 April 2019, most VAT-registered businesses with a taxable turnover above £85,000 must keep their VAT records digitally and use Making Tax Digital (MTD) compatible software to submit their VAT Returns. This will be mandatory for the remaining VAT registered businesses by 1 April 2022.
Let's first look at what hasn't changed:
- VAT returns will continue to be completed monthly, quarterly or annually
- VAT payments will still be due on the current payment dates
- No additional records need to be kept for VAT purposes
- Spreadsheets can still be used to record business transactions
- Current exemptions from online filing will continue
So, what has changed? There are two main changes to VAT with the commencement of MTD:
- the need for digital records to be retained and
- the way in which VAT returns are filed with HMRC.
One of the main aspects of MTD is the need to keep digital records. For VAT, digital records should include, for each supply, the time of supply (tax point), the value of the supply (net excluding VAT) and the rate of VAT charged.
Digital records should also include information about the business, including business name and principle business address as well as the VAT registration number and details of any VAT accounting systems used.
For businesses that currently record daily totals, this can continue, but the information has to be captured digitally.
There has been some confusion regarding what ‘digital record keeping’ actually means. Many businesses already keep digital records, either by spreadsheet or via a software solution, both of which are still acceptable forms of digital record keeping.
Digital records don’t need to be kept on just one piece of software; they can be maintained using multiple software solutions or via spreadsheets and software solutions. However, if information is shared between applications, the information must be exchanged digitally. This can be via an API (Application Programming Interface) or via a digital import/bridging link.
Filing of a VAT Return under MTD
To file a VAT return for your clients under MTD, agents must have access to HMRC’s new online services. The only way to access these online services is via an Agent Services Account (ASA). You may already have one if you’ve signed up for the Trust Registration Service (TRS) but, if this isn’t the case, you should do this as soon as possible by following HMRC’s guidance.
You’ll need a current government gateway user ID and password which is used to access other HMRC online services for agents. Once you‘ve been through the process, you’ll be issued a new government gateway user ID and password. You’ll need these details to access the new online services.
Do we need to re-authorise our clients?
Once you’ve created an ASA, you can access your new account and link all your current client relationships to the new account. You can do this by linking your old government gateway user IDs to the new ASA account. If you have more than one government gateway ID which you use for VAT services, you‘ll need to do this for all of your old IDs to make sure that all your existing VAT clients are linked to the new account.
Once you’ve linked all of your clients to the new account, you’ll then need to sign-up each business to MTD for VAT on a client by client basis. At the time of writing, HMRC has no facility to sign up multiple clients at once.