MTD Taxable Turnover

MTD Taxable Turnover

What is MTD taxable turnover? All VAT registered businesses must now comply with MTD for VAT. The exemption for businesses with taxable turnover below £85k has now ended.

The information below was relevant to businesses prior to April 2022, when the exemption was in place.

So what counts as taxable turnover for MTD?

MTD taxable turnover and VAT registration

The taxable turnover rules for MTD are the same as the rules for applying whether a business needs to register for VAT. This was announced in VAT notice 700/22.

Taxable turnover does include:

  • Standard rated goods or services
  • Reduced rate goods or services
  • Zero rated goods or services

Taxable turnover does not include:

  • Exempt supplies of goods or services
  • Items outside the scope of VAT

NOTE: This list covers the main items only. The legislation also covers reverse charges where goods or services are received from overseas businesses and much more.

Examples of taxable turnover – overseas transactions

VAT is an EU requirement. Therefore most businesses are aware that VAT is not charged on sales of goods or services outside the EU.

Sales of goods outside the EU are treated as a zero rated supply. This assumes that the goods were physically located in the UK prior to sale. Therefore as a zero rated supply this would be included within taxable turnover for MTD.

Supply of services outside the EU are treated as outside the scope of VAT. The place of supply for services is where the customer is based. If the customer is based outside the EU then the place of supply is also outside the EU. No VAT is charged and this therefore would be excluded from taxable turnover.

Include VAT in MTD taxable turnover calculation?

Businesses do not include VAT in the taxable turnover calculation. The figures need to be net of VAT.

For example a business with only standard rated sales of £80,000 with VAT of £16,000 does not exceed the taxable turnover threshold. As a result, they did not need to comply with the MTD rules. This exemption has now ended.

Rolling basis

Businesses which have a taxable turnover below £85,000 must monitor this on a rolling basis.

Each month a total of taxable turnover must be retained. Should any consecutive 12 months total exceed £85,000 the business was required to register for MTD. All VAT registered businesses must register for MTD now regardless of turnover.

What happens if turnover reduces?

Once a business has signed up to MTD they must continue to comply with the MTD requirements. Even if the taxable turnover subsequently falls below the £85,000 threshold. There is no deregistration from MTD.

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