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Government sets out plans for Making Tax Digital for VAT in Finance Bill (No.2)


On Making Tax Digital VAT reporting, clause 62 amends the existing powers to make regulations about the administration and enforcement of VAT. This will enable HMRC’ to make regulations requiring businesses to keep digital records and report digitally for VAT purposes (in addition to existing powers to make regulations requiring returns to be rendered digitally)’.

It also amends the existing legislation to make provision for a right of appeal to the Tribunal against decisions of the HMRC Commissioners (including decisions relating to the imposition of penalties) relating to the keeping of digital records and reporting digitally for VAT purposes.

The Bill also state that digital reporting regulations ‘must also exempt taxable persons from those requirements for any month (‘the current month’) where the value of the taxable supplies over the 12-month period ending with the month before the current month was less than the VAT threshold and the person was not subject to the requirement to keep or preserve records electronically in the month before the current month’.

This clause will enable regulations to be made requiring VAT-registered persons with turnover above the VAT registration threshold to keep digital records and provide regular digital updates to HMRC.

In particular, if regulations are made providing for records to be kept or preserved digitally then VAT-registered persons with turnover below the registration threshold will be exempted.

Regulations providing for digital record keeping cannot come into force before 1 April 2019.

The rules also clarify that for those who genuinely cannot use digital tools, due to individual circumstances such as disability, religion or geographical location, will be exempted from these obligations and alternatives will be provided.

James Hender, head of private wealth at Saffery Champness, said: ‘Meanwhile, although the Bill confirms the delayed timetable for Making Tax Digital, taxpayers should be under no illusions about tax’s digital future. The MTD iceberg may still be a way off but it has huge potential to sink unprepared taxpayers when it finally hits.’

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