There will be a large number of businesses which have a turnover currently under the Making Tax Digital (MTD) registration limit but which will be getting nearer to that figure over time. Mostly these businesses will not yet be registered for VAT, but some may have registered voluntarily as their particular circumstances have a benefit in reclaiming input VAT. Such businesses will continue to submit their VAT Returns under the old system.
If your turnover is under £85,000 then you will need to check on a monthly basis that it has remained that way, otherwise, there will be a need to register for VAT, or if already registered, to submit under the new portal.
Rather than waiting until the end of the annual accounting period to verify turnover, it needs to be checked on a rolling basis at the end of each month, as the regulations state that the relevant turnover is that in the twelve months to the end of the month just passed. We would recommend keeping a spreadsheet with an ongoing list of monthly turnover that can be used to total the previous twelve months at any time.
Breaking the limits
Should the limit be exceeded, a business already registered will need to make arrangements to ensure they have MTD complaint accounting software or appropriate bridging software. We can advise on the best course of action should the need arise. Those not currently registered will also need to go through the process of VAT registration.
The deadline for those needing to register is 30 days after the month end where the turnover limit was exceeded. The registration date will be the first day of the second month after the limit was exceeded. There are penalties and interest applicable to those who do not register in time.
The process of registration and arranging for compliant software takes some time, so it is important any breach of the limit is identified at the earliest possible moment.
It is possible to avoid registration if you can prove that your turnover in the following twelve months will not exceed £83,000.
If you have any concerns regarding the above or feel that you may be approaching the turnover limit, please do not hesitate to contact us. We can make sure everything necessary is in place at the appropriate time.
May 13th, 2019