Making tax digital for VAT

VAT Notice 700/22: Making Tax Digital for VAT, HMRC guidance and free ACCA member guidance are available

As previously highlighted, ACCA has partnered with Bloomsbury Professional Publishing to provide members with free practical guidance on MTD VAT implementation.

This free member digital resource, hosted on the Bloomsbury Professional online platform, is available from October. It provides guidance on the operation of MTD in plain English and brings together a coherent interpretation of:

  • primary law
  • regulations
  • HMRC non-statutory guidance
  • memorandum with software producers
  • government policy papers
  • guidance provided directly to professional bodies by HMRC and HM Treasury (where permission is given for publication)
  • public evidence given to parliament

The content uses a question-and-answer format with questions from accountancy practitioners. Content will be updated regularly as more sectors are brought in to the scope of the legislation, and will build into a suite covering:

  • MTD overview
  • VAT
  • income tax
  • corporation tax
  • tax agents

The VAT content includes sections on:

  • MTD functional compatible software
  • spreadsheets
  • digital links
  • bridging software
  • what must be reported
  • when to submit
  • VAT schemes
  • partial exemption
  • penalties and appeals

To register your interest in receiving support, please email with your membership number and the subject line 'MTD guidance'.

Agent services account

It is important that, if not already created, agents should create a new agent services account and link existing agent-client relationship(s). HMRC has highlighted 'that it’s important that your clients are aware of their obligations if they join MTD for income tax or VAT. They must keep digital business records and:

  • for VAT, submit their returns to HMRC using MTD-compatible software
  • for income tax, provide [voluntary] summary updates of income and expenses to HMRC quarterly through MTD-compatible software'

To sign up a client to MTD with an agent services account, agents will need the client’s VAT registration number (VRN), company registration number (CRN) and national insurance number (NINO).

HMRC states that where commercial accounting software is being used 'and before you have signed up your clients, you should speak to your software provider to find out when it will be MTD-compatible… and what you need to do to enable the new features once you have signed up your clients'.

VAT Notice 700/22: Making Tax Digital for VAT

VAT Notice 700/22: Making Tax Digital for VAT contains information on the provisions of the Value Added Tax (Amendment) Regulations 2018 (SI 2018, No.261).

One of the difficult areas for those businesses close to the threshold will be when they fall within the rules. It’s highlighted that 'only businesses with taxable turnover that has never exceeded the VAT registration threshold (currently £85,000) will be exempt from Making Tax Digital' and that businesses will need 'to keep an eye on...taxable turnover, especially... [when] it is close to the VAT registration threshold'.

The first VAT period for which the rules apply is the period covered by the return starting on or after 1 April 2019.

This requirement is highlighted in the following examples taken from the notice:

Example 1: existing business with taxable turnover above the VAT registration threshold on 1 April 2019

A business submits a quarterly return covering the period 1 March to 31 May 2019. The business taxable turnover exceeds the VAT registration threshold and therefore the business will need to comply with Making Tax Digital rules for the period starting 1 June 2019.

Example 2: business with a taxable turnover above the Making Tax Digital threshold at the point it needs to register for VAT

A business that is not registered for VAT is required to register from September 2019 because the taxable turnover over the previous 12 months has exceeded the VAT registration threshold. The business must follow the rules in this notice for all VAT returns that it is subsequently required to make as its taxable turnover was above the VAT threshold when it was required to register.

Example 3: VAT-registered business with taxable turnover below Making Tax Digital threshold until November 2019

A business is registered for VAT but its taxable turnover is below the VAT registration threshold until November 2019. The business must follow the rules in this notice for any VAT period that starts on or after 1 December 2019 as its taxable turnover now exceeds the VAT registration threshold.