The deadline for Making Tax Digital for VAT is less than a month away. Find out what to do to be ready and avoid any penalties
What is Making Tax Digital
Making Tax Digital (MTD) is an initiative by HMRC to get all businesses reporting digitally.
The four key foundations behind the initiative are:
- Better use of information
- Information can be gained by HMRC by third parties such as employers and banks to save individuals having to supply information.
- Tax in real time
- Businesses will find out how much tax they owe as close to real-time as possible rather than waiting until after year-end.
- A single financial account
- All tax information will be available in one place.
- Interacting digitally with customers
- Interaction with HMRC will be done digitally.
You can find out more information on our dedicated Making Tax Digital for VAT registered businesses page.
When is the Making Tax Digital for VAT deadline?
The deadline for all VAT-registered businesses is Tuesday 1st November 2022.
After this date, VAT-registered businesses will no longer be able to submit their VAT returns via their existing VAT online account unless HMRC has agreed they are exempt from MTD. MTD-compatible software must be used.
This deadline is less than one month away so if you’re not ready you need to act now!
What do I have to do to be ready?
You will continue to submit VAT returns but the new MTD submissions will be instead of the old VAT returns.
What to do to be ready to submit VAT returns in line with Making Tax Digital:
- MTD-compatible software must be used. It is imperative to ensure any digital software you may already be using is MTD compatible. You can check if your software is compatible on the GOV.UK site.
- This software then needs to have the correct permissions set to allow it to interact with HMRC. Information on how to manage permissions for software is available on GOV.UK
- Digital records must be kept for all current and future VAT returns. Digital records include:
- the VAT on supplies made
- the VAT on supplies received
- the value excluding VAT for everything you buy and sell
- any adjustments you make to a return
- reverse charge transactions
- any VAT accounting schemes you use
- your total daily gross takings if using a retail scheme
- items you can reclaim VAT on if using the Flat Rate Scheme
- total sales, and the VAT on those sales, if you trade in gold and use the Gold Accounting Scheme
- documents covering multiple supplies made or received on behalf of your business (volunteers, third-party businesses or employees)
- Register online for MTD. This must be done via the GOV.UK site for which you will need your Government Gateway ID and password. Full details of how to sign up and what to do it if you do not yet have a Government Gateway ID are available on the UK site.
What if I’m not ready
If any business is not ready in time and fails to submit their VAT returns via MTD-compatible software, they may be subject to a penalty. Defaults for failing to record VAT returns via MTD will be recorded and surcharge penalty points issued. Once a certain number of points have been accumulated, a financial penalty will be issued.
If it is impractical or not possible for your business to use a computer or compatible software to record your VAT returns, you may be able to apply for an extension.
Where can I get help?
At Maynard Johns Chartered Accountants we have a fully established digital processing service and can take the headache away of you having to manage the legal requirements of MTD for VAT.
We can also help you choose the right digital software for your business and help get it set up and train you to use it on a one-to-one basis.
We have trained hundreds of businesses to get ready for MTD for VAT and have an excellent and experienced team of professionals waiting to help you.
If you would like more information, get in touch on 01237 472071 or take a look at our fully established service with fixed-priced packages available.
Whatever you do, don’t delay! The deadline is less than a month away!