Our Ltd company is currently voluntarily VAT registered and using the Flat rate scheme.
I understand that we will not be required to file using MTD until our turnover exceeds £85,000 in a rolling 12 month period. I know that the Flat rate scheme turnover is calculated as all net invoices plus 20% VAT.
How is annual turnover calculated for MTD? Do I just use net invoice values plus amount of VAT retained by company.
Flat rate VAT is calculated on the gross of the invoice. So for example, let’s say you are on a 10% flat rate (keep it simple), and you invoice a client for £100 + VAT @ 20%.
You would invoice the customer:
plus VAT: £20.00
The VAT you would have to pay is then 10% of the £120.00, so £12.00.
If you enable flat rate on your account, when it comes to your returns QuickFile will calculate this for you. However, as always, double check your return calculations before submitting just to be sure.
At the end of each month you calculate the “cumulative taxable supplies” for the previous rolling 12 months - excluding the VAT.
So if your company makes a sale of £100 plus £20 VAT (because your company is voluntarily registered), the figure that is counted towards the cumulative taxable supply is £100 (excluding VAT), not £120.
It is the net figure - before VAT - that is used to calculate the cumulative taxable supplies figure- which if exceeds the VAT registration threshold - currently £85,000 - will mean that your company will have to keep electronic records and file returns electronically.
Taxable supplies (or sales) are made up of - Standard Rated (20%) or Zero Rated (0%) goods or services that you supply to customers.
If your company makes exempt supplies, their total is not counted in the cumulative taxable supplies figure.
It is the ‘Taxable Supplies’ phrase that doesn’t make clear how to count for the turnover total in the previous 12 months!
HMRC have a guide where they specify
Making Tax Digital for VAT requires VAT registered businesses with taxable turnover above the VAT registration threshold to keep records in digital form and file their VAT Returns using software.
at this link Here (Section 1.2 - Paragraph 1.)
PS. I recently sat - and passed - the taxation examination for the professional accountancy body I am training for - and although I’m not yet fully qualified, the information I’ve given above is directly out of the study text I followed for that examination - so it should be correct and I hope it helps - but - disclaimer - always check with a fully qualified professional.
Thank you so much. How “cumulative taxable supplies” is calculated is exactly what I needed to know. Big sigh of relief that our company hasn’t triggered MTD yet:)
Good luck with your studies, I’m sure you’ll do brilliantly.
Not sure that this is the correct place to post this, but I do think that the forum should have a “stickie” which gives this type of information.