Association of Certified Digital Accounting Professionals (ACDAP) qualifications and training programmes has already started bringing awareness of MTD to its students, professionals and all type of businesses in early 2018 by keeping in view Making Tax Digital (MTD) becoming mandatory for VAT from 1 April 2019. ACDAP has designed and created structured qualifications to learn the skill set about MTD.
ACDAP qualifications are internationally recognised, meeting the needs of employers, government and learners, both now and in the future for the purpose of the digitisation of accounts. ACDAP qualifications equip learners with real work scenarios for all accounting practices including digital accountancy & the MTD.
It is specially focused for those who are not only looking to learn different type of accounting software such as Sage, QuickBooks, SAP, SAPA, SAGE Compliance, Excel, Xero and Sage One but also want to implement at their workplace keeping in mind the guideline by the HMRC. Having a thorough knowledge of MTD is very vital for those businesses who are already VAT registered and who are going to be registered for VAT in 2019. Several VAT registered businesses are exempted from MTD because of their revenue and some will need to claim exemption from MTD. ACDAP dissemination is focused to the following key parameters.
The businesses having annual revenue upto £85,000 are automatically exempted from the MTD, even they are VAT registered. The VAT notice on MTD (Notice 700/22) is confusing on this point, which mentions “Only businesses with taxable turnover that has never exceeded the VAT registration threshold (currently £85,000) will be exempt from Making Tax Digital.” This is not right, as the turnover test for MTD comes into effect on 1 April 2019, requires the business to measure its taxable turnover for 12 months ending with the last complete month, which on 1 April 2019 will be 12 months to 31 March 2019. The level of turnover recorded for earlier years is not relevant.
Andrew is VAT registered because his taxable turnover in 2013 was £80,000, when the VAT registration threshold was £79,000. If Andrew’s annual turnover is £80,000 at 1 April 2019 and he is still VAT registered, he doesn’t have to comply with MTD. Andrew can continue to submit his VAT returns as he does now, either by inserting the figures into the online form (the HMRC portal) manually, or through his accounting software.
It means VAT-able supplies, which are all sales subject to VAT including zero-rated sales, but not exempt sales. For both the VAT registration test and the MTD entry test, the business must keep an eye on its taxable turnover for the last 12 months. However, for MTD entry there is no forward-looking test of the value of supplies to be made in the next 30 days.
Analysis of turnover
If a business has registered for VAT voluntarily and its turnover is under £85,000, it will have to examine its aggregate turnover every month, for the last 12 month period, to see if it must comply with the MTD rules from the beginning of its next VAT period. Once a business has been required to enter MTD due to its turnover being above the VAT threshold, it cannot opt-out again while it is VAT registered. The business will only be able to leave MTD if it deregisters for VAT.The requirement to join MTD is based on the VAT registration turnover threshold, which has been frozen at £85,000 until at least April 2020. If the VAT registration threshold is reduced in future, more businesses will be drawn into MTD.
How to claim exemption
Owners of the business who wish to claim exemption from MTD on the basis of the owner’s religion, insolvency of the business, or because it is not reasonably practical for the owners to use digital tools to keep business records, must call the HMRC VAT helpline.
HMRC is planning to write a letter to all the VAT registered businesses who it thinks will be required to comply with MTD. The recipients of that letter are likely to be chosen based on their turnover reported in VAT returns for the last year. You should contact those clients before this letter arrives on their desk.
How ACDAP communicated
ACDAP have communicated to its training provider and students/clients through all channels, HMRC has also prepared a communications pack for accountants to use as raw material when writing or speaking to clients about MTD. There is no indication that HMRC will run an advertising campaign about MTD, so it will be up to you get awareness about this major change in how VAT must be reported.