What’s new with Making Tax Digital (MTD)?

HMRC have updated their guidance - VAT Notice 700/22: Making Tax Digital for VAT

MTD is about VAT-registered businesses only?

Yes - Making Tax Digital (MTD) is mandatory for ‘non-deferred’ businesses trading above the VAT threshold for VAT return periods commencing on or after 1 April 2019; VAT Notice 700/22 contains most of the practical guidance businesses need to comply with the MTD rules.

What’s in the new guidance?

The update set out new information and rules on the use of supplier statements, petty cash transactions and charity fundraising events with a view to making record-keeping a little easier. The guidance on the turnover test, following the rules when exempt from MTD, digital links, and supplies made and received by third party agents has also been updated.

Is there any material change that might affect an ordinary business?

Yes, quite possibly, in terms of reduced record-keeping:

Use of supplier statements – these can be used instead of individual invoices as long as all supplies on the statement relate to the same VAT period, and the total VAT charged is shown;

Petty cash transactions – individual purchases with a VAT-inclusive value below £50 can be batched into a single entry in the digital records. The entry may not however exceed a VAT-inclusive value of £500; and

Charity fundraising events – all sales made can be treated as covered by one invoice for the event, and the same for event purchases.

Anything else of note?

In relation to the sections that have been updated, in section 4.2.1 Digital links, the following paragraph has been added:

“This could be a transfer or exchange of data within a business (for example, between 2 systems) or a transfer of data to a tax agent in order that they can prepare a VAT Return or make a calculation (for example, a Partial Exemption calculation).”

Why have they brought in these changes?

These new provisions are practical and designed to reduce the work involved in complying with MTD, making compliance easier and more straightforward. If you have any questions on these changes or MTD more generally please speak to your accountant or professional advisor.