Making Tax Digital – delayed start for some?

The rules known as “Making Tax Digital” require most VAT registered entities to keep records digitally and to submit information relating to the VAT Return in a wholly digital manner, with digital links between each part of the process. The rules start from April 2019, but some exceptions have now been granted pushing this back by 6 months.

“Making Tax Digital” – or “Making Tax Digital for VAT” as it is sometimes known – is a new set of requirements that impose digital record keeping obligations and electronic submission of information for most VAT registered entities that applies from April 2019.

If the academy is registered for VAT and has a turnover of VAT-able business supplies in excess of the VAT registration threshold (£85,000), then MTD requires digital business records to be kept and for the VAT returns to be sent to HMRC using MTD-compatible software.

The first VAT period affected is that starting on or after 1 April 2019, so may be the quarter to 30 June 2019 or for the month of April 2019 if using monthly VAT Returns.

Although HMRC have announced that they will allow a “soft landing” for the first year, where they will not charge penalties if, for example, software to link electronic records is not used, there still remains a tight timescale for making preparations and ensuring the new process runs smoothly.

In an unexpected announcement on 18 October 2018, HMRC have now announced that MTD will be delayed by six months for:-

• trusts
• ‘not for profit’ organisations that are not set up as a company
• VAT divisions
• VAT groups
• those public sector entities required to provide additional information on their VAT return (such as government departments and NHS Trusts)
• local authorities
• public corporations
• traders based overseas
• those required to make payments on account and
• annual accounting scheme users.

For academies this may exclude many Multi-Academy Trusts (MAT’s) and those academies with a VAT group involving a subsidiary company.

Many academies who make limited VAT-able business supplies – which will exclude VAT-exempt lettings – may be outside MTD as the relevant turnover for MTD may not exceed the £85,000 threshold despite being VAT registered and so will remain outside MTD until either the threshold is exceeded or the rules are extended to all entities. This is anticipated to be in 2020 at the earliest.

The announcement can be viewed here