- Only businesses with turnover above £85,000 will be required to take part but will not be permitted to withdraw later on turnover grounds while they remain registered.
- VAT-registered businesses with turnover up to £85,000 and insolvent businesses will be able to opt in and out.
- There will be special exemption rules in case of TOGCs, otherwise exemptions will apply on religious grounds, in insolvency and if, as currently, HMRC is satisfied that electronic submission is impossible due to disability, age, remoteness of location or any other reason.
- Businesses will be required to keep the same records as at present and retain them for 6 years after deregistration. Penalties for failure to keep and preserve records will not change. What will change are the method of submission and the scope of information to be submitted.
- Non-quarterly return periods can be maintained under MTD.
- Error correction will not be reported via MTD. The current procedures will continue.
- Businesses in MTD will make their returns using “functional compatible software”. This means “a software program or set of compatible software programs which can connect to HMRC systems via an Application Programming Interface (API)”. This also means that all such businesses will need to use software such as Sage, Xero, Quickbooks or some other compatible software. No more manual VAT record keeping.
The functions of the compatible software must include:
a. keeping and preserving records in a digital form as required by the regulations;
b. creating a VAT return from the digital records and providing HMRC with this information;
c. digitally providing HMRC with additional data (summary totals of information required to be kept) on a voluntary basis; and
d. receiving information from HMRC via the API platform in relation to a relevant entity's compliance with obligations under the regulations.
- The information a business must keep and preserve digitally will include:
a. business name;
b. principal place of business;
c. VAT registration number;
d. VAT accounting schemes in use;
e. the VAT account;
f. each input and output split between standard-rated, reduced-rated, zero-rated, exempt and outside the scope;
g. dates of each supply made and received;
h. dates of payments made and received; and
i. more limited information for those using retail schemes and those on the flat rate scheme.
