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    New requirements for UK VAT customers from 1 April 2019

Making Tax Digital

27 November 2018

Will the new VAT filing requirements raise the bar for tax compliance?

For VAT periods starting on or after 1 April 2019, UK VAT registered businesses will no longer be able to submit VAT returns the same way they currently do. Instead, VAT returns must be submitted using the new ‘Making Tax Digital’ (‘MTD’) for VAT regime.

The UK Government has released VAT Notice 700/22  explaining the new rules for MTD for VAT. In particular the notice explains what digital records a business must keep to be MTD compliant and the changes to the format in which VAT returns must be submitted going forward.

What are the MTD for VAT requirements and what is changing?

MTD will require VAT registered businesses with taxable turnover above the VAT registration threshold (currently £85,000) to maintain records in digital form and to file their VAT Returns using MTD functional compatible software. These regulations will come into effect from 1 April 2019. As confirmed in the UK Budget 2018 yesterday, no change to the VAT registration threshold is anticipated before April 2022.

The Notice provides some clarity around issues which many stakeholders have raised such as the specific MTD requirements, the potential exemptionsavailable, what records are required to be stored digitally, what constitutes what constitutes functionally compatible software, what are digital links, which VAT calculations can be conducted outside of software, how adjustments should be reflected, how to correct errors and the application of MTD to special VAT accounting schemes.

What changes should you be making now to prepare for MTD?

While MTD for VAT will come into force in April 2019, the requirement to demonstrate a clear audit trail via a digital link to the source data will not come into effect until April 2020. Therefore, for the first year of MTD there will be what HMRC calls a ‘soft landing’ for the regime.

As BDO will have the necessary software in place to ensure that all VAT returns submitted post April 2019 comply with the new requirements, where we are your VAT agents no immediate changes to the preparation of your VAT return should be required.

Businesses will however be required to keep appropriate digital records effective from April 2019, notwithstanding the fact that the requirement to include digital links to the underlying data will not come into effect until April 2020. 

Consequently, while there will be no significant changes to how your VAT return will look in April 2019, we would recommend that you conduct a review of your current record keeping processes and talk to us in the event that you have any queries as to whether or not they will meet the new MTD requirements.

Other Points of Note

If VAT taxable turnover subsequently falls below the VAT registration threshold businesses must continue to follow the MTD rules.

The deadlines for sending VAT returns and making payments are not changing.

While MTD will be introduced for other tax heads, no changes in this regard are expected before April 2020 at the earliest.


If you have any queries on MTD for VAT and the potential impact it will have on your business or would like to discuss any aspect of these changes in more detail, please contact your usual BDO adviser.