MTD for VAT is now up and running. It commenced from 1st April 2019 for all VAT-registered businesses with a taxable turnover above the VAT threshold (£85,000). A quarterly return filling in the same 9 boxes will need to be filed using compatible software which can communicate to HMRC.
This all seems fairly straight forward, and it will be for the majority of businesses who use the Standard VAT scheme. However what if you don’t?
Adjustments are often required prior to submission of the VAT return, for example for fuel scale charges, partial exemption and so on. Under MTD there are 2 ways these adjustments can be made:
Under this scheme businesses can submit just one VAT return a year, and make advance VAT payments on the last return submitted. It is expected the current conditions will be retained. However, the MTD digital record keeping must be maintained, and the annual return must be filed digitally.
If you account for VAT using the Flat Rate Scheme you don’t need to keep a digital record of your purchases unless they are capital expenditure goods on which input tax can be claimed. You also don’t need to keep a digital record of the relevant goods used to determine if you need to apply the limited cost business rate.
In addition to the mandatory digital record keeping for the standard scheme, if you account for VAT using a retail scheme you must keep a digital record of your Daily Gross Takings (DGT). You are not required to keep a separate record of the supplies that make up your DGT within functional compatible software. You must continue to follow guidance supplied in the VAT notice 727 retail schemes.
You are not required to keep the additional records required for these schemes (ie the stock book) in digital form, nor are you required to keep the calculation of the marginal VAT charged in digital form. If you do keep a digital record and your software does not allow you to record the VAT on the margin, then you will need to record the supply as either one standard rated supply and one zero rated supply. Alternatively, you can record the sale at one rate and correct the VAT through an adjustment at the end of the period, using the same method HMRC will allow you to use to correct the VAT on a mixed supply.
If you need help with MTD and finding compatible accounting software please get in touch and we will be happy to help
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