VAT Notice 700/22: Making Tax Digital for VAT contains information on the provisions of the Value Added Tax (Amendment) Regulations 2018 (SI 2018, No.261).
One of the difficult areas for those businesses close to the threshold will be when they fall within the rules. It’s highlighted that 'only businesses with taxable turnover that has never exceeded the VAT registration threshold (currently £85,000) will be exempt from Making Tax Digital' and that businesses will need 'to keep an eye on...taxable turnover, especially... [when] it is close to the VAT registration threshold'.
The first VAT period for which the rules apply is the period covered by the return starting on or after 1 April 2019.
This requirement is highlighted in the following examples taken from the notice:
Example 1: existing business with taxable turnover above the VAT registration threshold on 1 April 2019
A business submits a quarterly return covering the period 1 March to 31 May 2019. The business taxable turnover exceeds the VAT registration threshold and therefore the business will need to comply with Making Tax Digital rules for the period starting 1 June 2019.
Example 2: business with a taxable turnover above the Making Tax Digital threshold at the point it needs to register for VAT
A business that is not registered for VAT is required to register from September 2019 because the taxable turnover over the previous 12 months has exceeded the VAT registration threshold. The business must follow the rules in this notice for all VAT returns that it is subsequently required to make as its taxable turnover was above the VAT threshold when it was required to register.
Example 3: VAT-registered business with taxable turnover below Making Tax Digital threshold until November 2019
A business is registered for VAT but its taxable turnover is below the VAT registration threshold until November 2019. The business must follow the rules in this notice for any VAT period that starts on or after 1 December 2019 as its taxable turnover now exceeds the VAT registration threshold.