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MTD and cash accounting

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Client received letter from HMRC saying missed filing deadline for MTD.  Turnover for 1st April 18 - 31st Mar 19 under threshold.  Turnover for 1st Nov 18 - 31st Oct 19 under threshold, prior to this it was way above.  Client on cash accounting and received payment of £5k in Jan 19 relating to May 18 invoices.  VAT returns for Nov 18 - Aug 19 show total sales of £89k although this will be receipts received in the period and not supplies made.  HMRC say taxable turnover is £89k and client should register for MTD, I'd rather not unless client has to as they have been considering de-registering.  Am I missing something?  I thought taxable turnover was value of supplies made in period, not receipts received.  

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By johnhemming
18th Nov 2019 19:21

It's an interesting question, but it might be easiest just to join MTD.

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By nush78
18th Nov 2019 19:39

I'd rather not join unless the client has to, 1 -out of stubbornness and 2 - its likely turnover will remain under the threshold in the future
Perhaps if HMRC knew which scheme people were using it would help but apparently they don't hold this information

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By johnhemming
18th Nov 2019 19:49

People are supposed to be able to leave MTD now. I don't know what the web page is for this, but I am told one exists.

Hence you have a choice between joining MTD or arguing about whether the mandatory test is done on an accruals basis and so your client does not have to join.

I would think joining MTD takes less time.

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RLI
By lionofludesch
19th Nov 2019 09:44

Why don't you apply for exemption ?

By the time they've decided and you've appealed and they've decided again, you'll know whether the trader is going to be able to deregister or not.

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By [email protected]
21st Nov 2019 12:28

Yup,
Cash accounting, by it's nature, is based on receipts and payments.
When the invoice was raised is irrelevent* unless you are switching away from cash accounting.
HMRC are seeing the receipts tipping above the threashold, therefore issuing MTD letter.
Unlike, say the flat rate scheme, you dont have to apply for cash accounting so HMRC don't know if you are or not.

Oh and don't confuse cash accounting for VAT and whether you're cash or accruals accounting for your accounts. The two are independent of each other.

NOTE: *You do need to be mindful of the cash accounting threshold too, because if your invoicing is over that then you have to apply normal rules.

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