From 1 April 2019, all VAT-registered businesses (both incorporated and unincorporated) with a turnover above the current VAT threshold – £85,000 – will be required to record and send their VAT information to HMRC digitally using Making Tax Digital-compatible software. This applies to sole traders, partnerships, companies, LLPs and charities.
More than 99% of all VAT returns are currently sent to HMRC electronically, but this will no longer be enough to be MTD-compliant. With only 13% of VAT returns currently submitted via software, statistics suggest that the majority of UK businesses will need to look at making the move to MTD-compatible software to meet the requirements of the new legislation – and ideally well in advance of the April 2019 deadline.
For those companies or unincorporated businesses with a turnover that falls below the VAT threshold, entering the MTD VAT regime is optional. A word of warning here – those businesses which sign up, either on the basis of turnover or choice, will remain in the regime, even if turnover falls to a level below the VAT threshold.
There are some businesses that are exempt from the new regulations, on the grounds of disability, religious belief or if it is the subject of an insolvency procedure.