New requirements to manage VAT accounting records and returns

Published on 10 January 2019

On 1 April 2019, the Value Added Tax (Amendment) Regulations 2018 (the Regulations) come into force imposing new requirements on VAT‑registered businesses to manage their VAT accounting records and returns digitally. The Regulations take effect for taxpayers from the start of their first prescribed accounting period beginning on or after 1 April 2019.

Why does it matter?

VAT is the first tax to go digital with other taxes following in 2020. The Regulations provide for a “soft landing” in the first year of Making Tax Digital (MTD) whereby the “copy and paste” function into the HMRC portal may still be used for VAT return submissions.

The Regulations provide that VAT registered businesses whose taxable turnover exceeds the VAT registration threshold (£85,000) must ensure they use software to:

  • keep and preserve their VAT accounting records in a digital format, and
  • use these digital records to electronically submit their VAT returns.

Businesses in the scope of the Regulations will now be required to maintain digital records using “functionally compatible software” which is capable of connecting to HMRC’s platform. Businesses must source and use software which is able to:

  • create a VAT return from the digital records
  • provide HMRC with this information digitally
  • keep the required records in a digital form (preserving these for up to six years)
  • provide HMRC with additional data on a voluntary basis, and
  • receive information from HMRC about the business’ compliance record.

HMRC will not be supplying the software but does provide a list of approved software suppliers.

The following exemptions apply to the MTD obligations:

  • religious beliefs that are incompatible with the use of electronic communications
  • where it is not reasonably practical due to age, disability, remoteness of location or other reason
  • the business or person is subject to an insolvency procedure, and
  • the business is voluntarily registered for VAT and is trading under the VAT turnover threshold.


What action should you take?

  • Assess whether the Regulations apply to your business

  • Consider seeking advice on the most appropriate software for your business and ensure you have the software in place and operational ahead of the first VAT accounting period following 1 April 2019

  • Ensure your business is equipped to meet the more onerous record-keeping obligations.
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