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This update, from Steve Parkinson of the The Parkinson Partnership LLP, amends our advice for VAT-registered councils with a taxable turnover less than £85,000, having sought opinions from the CIPFA VAT committee.

Where a council is not VAT-registered and reclaims using a VAT126 form, it will NOT be affected during 2019/20, nor does it seem likely this will change in 2020/21.  

Councils that are VAT registered AND have taxable income exceeding the £85,000 threshold will have to comply from 1 October 2019, although they may join the pilot scheme from 1 April 2019 if they wish.  The 6-month deferral to 1 October 2019 for local authorities was announced by HMRC last October.

Making Tax Digital will require all affected bodies to keep their records digitally and submit VAT return figures directly from the software, rather than logging into an HMRC account and entering the figures manually. 

If a council uses an accounting package, they should check whether their provider is updating it to cope with MTD.  Software providers in the local council sector have addressed this and should be ready for VAT returns being submitted by the software.

VAT registered councils above the threshold that keep their accounts on spreadsheets should consider whether an accounting package would be a better solution for digital record-keeping. At least one company has developed an interface for spreadsheets, but we do not recommend spreadsheets for

Councils below the £85,000 VAT registration threshold do not have to comply but may wish to look at the benefits of digital submission if they use compatible software.

The deferral to 1 October 2019 also applies to VAT registered trusts and not-for-profit organisations, unless they a company.  The guidance is available here:

https://www.gov.uk/guidance/check-when-a-business-must-follow-the-rules-for-making-tax-digital-for-vat

VAT Notice 700/22 (link below) gives more detail about what is meant by digital record-keeping and submission.

https://www.gov.uk/government/publications/vat-notice-70022-making-tax-digital-for-vat

This should be read in conjunction with the policy paper (link below), which refers to the deferral to 1 October 2019.

https://www.gov.uk/government/publications/making-tax-digital/overview-of-making-tax-digita


This article was written by Steve Parkinson of The Parkinson Partnership


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