MTD for VAT FAQs: 19 key Making Tax Digital questions answered – Sage Recommendation United Kingdom


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MTD for VAT FAQs: 19 key Making Tax Digital questions answered – Sage Recommendation United Kingdom

Making Tax Digital (MTD) is the UK authorities’s initiative to simplify tax accounting for companies and people.

You may already use HMRC’s on-line providers to finish duties akin to submitting tax returns, however MTD requires you to make use of software program for on a regular basis accounting and asks you to maintain digital accounting information.

Listed below are among the most often requested questions round MTD for VAT, along with solutions.

1. What is Making Tax Digital for VAT?

2. When will the scope of MTD for VAT expand?

3. Is Making Tax Digital for VAT compulsory?

4. Is Making Tax Digital only for VAT?

5. What records do businesses need to keep digitally?

6. Who does MTD for VAT apply to?

7. Who is exempt from MTD for VAT?

8. If I am exempt, how do I file my VAT Returns?

9. What is the timetable for MTD for VAT?

10. What is the MTD for VAT deadline?

11. What was the soft-landing period?

12. What should you be doing to prepare for MTD for VAT?

13. What about VAT special schemes?

14. How do I register for MTD for VAT?

15. What information needs to be submitted?

16. How do I submit a MTD for VAT Return?

17. Who can file the MTD for VAT Return?

18. How do I file my VAT Return once I am in MTD for VAT?

19. What happens if I can’t file my VAT Return once registered?

Need more information on submitting a MTD for VAT tax return?

Making Tax Digital for VAT means utilizing software program for the next duties:

  • Protecting and sustaining your VAT accounting information
  • Creating VAT Returns
  • Sending the VAT Returns to HMRC.

It means you possibly can now not submit VAT Returns through the HMRC web site. You want to use software program as a substitute.

Your accountant can nonetheless submit VAT Returns in your behalf, however it’s worthwhile to use software program to your VAT accounting.

Along with the above, you should hold your VAT accounting information for at the very least six years (or longer for some VAT schemes).

In April 2022, a brand new stage was launched.

Making Tax Digital for VAT now applies to all VAT-registered companies, together with these voluntarily registered for VAT.

Initially, MTD for VAT was a authorized requirement just for VAT-registered companies over the registration threshold (at present £85,000).

MTD for VAT is a authorized requirement for all VAT-registered companies, no matter turnover.

Earlier than 1 April 2022, companies needed to adjust to MTD for VAT guidelines if their taxable turnover exceeded the VAT threshold (at present £85,000).

No. MTD for Income Tax might be launched in April 2024, and MTD for Company Tax might be launched no sooner than April 2026 (though this date has but to be confirmed by the federal government).

You could find extra details about Making Tax Digital for VAT, Income Tax and Corporation Tax on our MTD hub.

Making Tax Digital for VAT software program

Uncover how Sage Accounting may also help you get your MTD for VAT submission proper, calculate your invoice and submit your VAT Return with ease.

Find out more

MTD for VAT requires you to maintain some information digitally:

  • Your online business identify
  • The deal with of your principal office
  • Your VAT registration quantity
  • Particulars of any VAT accounting schemes that you just use
  • Most companies might want to document for every bill (or “provide” within the VAT Discover terminology) the time and date of provide (tax level date), the web worth (excluding any VAT) and the VAT fee used to calculate VAT.

Some companies might want to hold info relying on their VAT scheme and circumstances.

In case you print and even handwrite invoices or receipts, it’s worthwhile to switch the VAT accounting info to your accounting software earlier than submitting your VAT Return.

Bear in mind to not destroy the paperwork since you may require it for different facets of your accounting.

MTD for VAT is regulation for all VAT-registered companies no matter turnover.

If your enterprise is VAT-registered, MTD for VAT is more likely to have an effect on you, and it isn’t normally doable to choose out.

In case you can’t use computer systems, software program, or the web, you possibly can ask HMRC to exempt your enterprise digitally.

Causes may embrace:

  • Age, incapacity, or distant location
  • Spiritual grounds that cease you from utilizing computer systems
  • Every other explanation why utilizing MTD for VAT isn’t sensible.

You (or your accountant) must name or write to HMRC to ask them to grant you a digital exemption.

You’re additionally exempt from MTD for VAT if your enterprise is topic to an insolvency process.

In case you’re digitally exempt, you may have the ability to file a paper VAT Return however solely at HMRC’s discretion.

You or your accountant ought to contact HMRC to debate this selection.

In April 2019, MTD for VAT grew to become necessary for VAT-registered companies and organisations (together with sole merchants, partnerships, restricted corporations, non-UK companies registered for UK VAT, trusts and charities) with turnover above the VAT threshold (at present £85,000).

Sure extra complicated organisations (akin to native authorities, public companies, trusts, and VAT divisions and teams) had a deferred begin date and joined MTD for VAT in October 2019.

VAT-registered companies beneath the VAT threshold joined these companies and organisations in April 2022.

We’ve handed it. In April 2022, MTD for VAT grew to become necessary for all VAT-registered companies no matter turnover.

When MTD for VAT began in April 2019, HMRC gave companies a soft-landing interval, permitting them to proceed copying and pasting information for his or her VAT accounting with out penalties till April 2020. Ordinarily, this was prohibited due to MTD’s digital linking rules.

At first of the coronavirus pandemic, HMRC determined to increase the soft-landing interval to April 2021.

Nevertheless, this era has ended, and HMRC didn’t permit an analogous interval from April 2022.

Subsequently, any enterprise switching to MTD for VAT wants digital hyperlinks all through their VAT accounting.

There are strict guidelines on what defines a digital hyperlink for MTD. Based on HMRC, they’ve two traits:

  • Knowledge is transferred electronically between software program applications, merchandise, or purposes. This might embrace linked cells in a spreadsheet, akin to a components.
  • The switch is automated. It doesn’t want handbook intervention akin to copying over the information by hand or manually shifting information between two or extra items of software program. However you possibly can click on a button to provoke the method.

The essential distinction between MTD for VAT and the way you could have been submitting VAT Returns earlier than is that you should now use software program to your VAT accounting and VAT Returns.

You’ll most likely use an MTD for VAT feature within cloud accounting software, the place information is saved securely on-line.

In case you aren’t utilizing cloud accounting software program or utilizing older software program (and even no software program in any respect), it’s worthwhile to be prepared for MTD for VAT now.

MTD for VAT applies for those who use VAT schemes supplied by HMRC, such because the flat fee, margin, or retail schemes.

In case you’re VAT-registered, you possibly can register for MTD for VAT at any time. MTD enrolment is automated for those who’re signing up for VAT for the primary time.

To keep away from points with earlier VAT Return funds if utilizing direct debit, you should not join lower than:

  • Seven days earlier than your first MTD VAT Return is due
  • 5 days after your first MTD VAT Return is due.

In case you don’t pay by direct debit, you should join at the very least three days earlier than your VAT Return.

Your online business received’t be enrolled routinely for MTD if registered for VAT.

The registration course of entails logging in with the Government Gateway account for your enterprise. You may need used this beforehand when submitting VAT Returns through the portal web site.

In case you don’t have an account, create one with an e mail deal with.

Be aware that when registered for MTD for VAT, you’ll most likely must activate the MTD performance within the software program, requiring your MTD login particulars.

To register for MTD for VAT with HMRC, it’s worthwhile to enter the next info when requested upon visiting the MTD for VAT registration website:

  • Your Authorities Gateway ID and password
  • Your organization’s VAT quantity (which you’ll discover in your VAT registration certificates)
  • The date your enterprise grew to become VAT registered (once more, discovered in your VAT registration certificates)
  • The postcode of the principal office (the place the place your organization carries out most of its enterprise actions and/or retains its monetary and enterprise information)
  • The Field 5 quantity out of your most up-to-date VAT Return, which is to say, the quantity of your final VAT Return
  • The month you submitted your most up-to-date VAT Return.

You want to inform HMRC throughout registration which MTD-compatible software program you’re utilizing to your VAT accounting, so you will have to make this resolution forward of time.

When you’ve registered, when your VAT Return date comes round, you’ll must file it through the accounting software program your enterprise makes use of, or doubtlessly utilizing bridging software for those who calculate your VAT with out the good thing about accounting software program (e.g. utilizing a spreadsheet).

Your accounting software program may also should be MTD for VAT-ready—and it will nearly definitely be the case for those who use cloud accounting software, however you need to all the time verify along with your supplier.

VAT Return submitting in numerous accounting software program packages varies, however typically, you need to search for an choice to create a VAT report, return, or one thing related.

Generally, you’ll then want to inform the software program to start out submitting utilizing the MTD course of.

Any changes or reliefs should be utilized earlier than you click on to submit the VAT Return to HMRC.

You possibly can file the VAT Return, or your accountant can achieve this in your behalf.

They’ll use their HMRC Agent Companies account to do that and might want to register in your behalf with HMRC. So you need to talk about this along with your accountant nicely forward of time.

If in case you have Sage Accounting, you possibly can ship a VAT Return with MTD for VAT.

As well as, here’s a video displaying the steps required to submit an MTD for VAT Return using Sage Accounting.

HMRC introduces a points-based late submission and late fee sanctions system for MTD for VAT in January 2023.

In abstract, the next will apply:

  • In case you miss a submission deadline, you’ll obtain one level.
  • As soon as your variety of factors exceeds a threshold in a given interval, a penalty of £200 is utilized. This threshold relies on how often you make a VAT submission.
  • Quarterly submissions have a threshold of 4 factors earlier than the penalty is utilized.
  • Month-to-month submissions have a threshold of 5 factors.
  • Annual submissions have a threshold of two factors.

You could find extra particulars within the Penalties for Late Submission policy paper.

We’ve received you lined. We’ve written an article protecting complete recommendation on how to submit a Making Tax Digital for VAT tax return.

Hopefully, we’ll have answered among the burning MTD for VAT questions you may need.

If in case you have any extra queries, be happy to pop your questions within the feedback under, and we’ll get again to you as quickly as we will.

Editor’s notice: This text was first revealed in October 2021 and has been up to date for relevance.


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