Launched on 1 April 2019, most VAT registered businesses are now required to comply with the new Making Tax Digital for VAT regime. Making Tax Digital for VAT is mandatory for businesses registered for VAT and with a taxable turnover over £85,000. All businesses caught by the legislation will have to keep their financial records in a digital format and file their VAT return using compatible software.
If your business is required to comply with the new Making Tax Digital for VAT regime, this will begin on the first day of your first VAT period starting on or after 1 April 2019. Most businesses caught by the legislation are now keeping their records in a digital format, however, many businesses may not be aware that they are required to register to use the new system and that this process can take up to seven working days to complete. The timing of this step is however critical – it is the point of no return. A business should not sign up to MTD for VAT until all its non-MTD for VAT returns have been filed. Once a business has been signed up to MTD for VAT it will not be possible to file any VAT returns through the government gateway online VAT return or using non-MTD compatible VAT software. Users are required to allow at least 24 hours after submitting the last non-MTD VAT return before signing up. Those that pay by direct debit have a more restricted time period in which they can be signed up, due to the impact of banking regulations. Where payment is made by direct debit the business cannot be signed up in the 5 working days after the submission deadline for the last non-MTD VAT return and must be signed up at least 7 working days before the first MTD for VAT return is filed. Should you have any questions on when you should sign up please contact us to discuss this.
Once you have confirmed that you are ready to sign up for the Making Tax Digital (i.e you have submitted your last non MTD VAT return ) and that your business has Making Tax Digital for VAT compatible software you must sign up for Making Tax Digital via your Government Gateway account. HMRC has warned businesses that this service may be slow during busy times.
Once you have successfully signed up for MTD for VAT, HMRC will send you a confirmation email within 72 hours of signing up. Businesses should not submit a VAT Return until the confirmation email has been received.
The last step that is required is for you to authorise your software. Also called linking your software, this process enables your MTD compatible software to communicate with HMRC when filing your VAT return. This step is different depending upon the software you use.
There will be a ‘soft landing’ period during the first 12 months, in which HMRC has promised not to penalise companies if they make a genuine reporting error.
If you have any questions relating to signing up for MTD or authorising your software ready for Making Tax Digital please give us a call.
Smailes Goldie Group
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