Making Tax Digital – Who’s in, who’s out?

We’ve all heard about it and after some delays Making Tax Digital (MTD) will now come into effect from 1st April 2019 and apply for your first ‘VAT period’ starting after that date.

The introduction of MTD will mean that, for qualifying organisations, records have to be kept in a digital form and VAT Returns filed using ‘functional compatible’ software like Liberty Accounts.

Who does it apply to?

The simple rule is that if your organisational taxable turnover/income exceeds the VAT threshold (currently £85,000) then it applies to you.

What is taxable income?

All sales or services where there is a VAT element is included in taxable income i.e. it excludes any sales or services that are either exempt or out of scope for VAT purposes. For charities taxable income would NOT include income from, for example, donations and grants.

Other rules that should be considered:

If your organisations’ taxable income falls under the threshold after your first MTD submission you will be required to continue submitting unless you de-register from VAT.

If the organisations’ income has exceeded the threshold in the previous 12 months (i.e. income in a rolling 12 month period) you will be required to register for VAT from the date at which it is exceeded.

Exemptions

Unless you choose to do so, you will NOT have to follow MTD rules if HMRC is satisfied that any of the following apply:

your organisation is run entirely by practising members of a religious society whose beliefs are incompatible with the requirements of the regulations (for example, those religious beliefs prevent them from using computers);

it is not reasonably practicable for you to use digital tools to keep your business records or submit your returns, for reasons of age, disability, remoteness of location or for any other reason;

you are subject to an insolvency procedure.

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