Staying HMRC Compliant: VAT Returns Have Changed

Making Tax Digital (MTD) is here.

British businesses must submit VAT returns digitally via MTD-ready software. From April 2020 you will be required to transfer data between compatible software through a digital link. That puts an end to manual corrects, copying and pasting from spreadsheets and typing-up.

In order to help you prepare for what could be your first MTD for VAT submission, Mike Parkes from GoSimpleTax has provided a guide to ensuring you’re fully compliant.

Check if you need to comply with MTD

As a general rule, the majority of VAT-registered businesses with a turnover above £85,000 are subject to MTD for VAT for their first VAT return period starting after 1^st April 2019. If this applies to you or a client, you’ll need to address this.

If your taxable income is below £85,000, you won’t need to embrace this software yet. However, if you are VAT-registered, the only other exemptions from following the MTD rules are if:

 - Your business (or your client’s business) is subject to an insolvency procedure

- You (or your client) cannot use the necessary technology due to age, disability, or location

- You (or your client) object to the necessary technology-based on religious grounds

Register for MTD for VAT

You need to register at least one week before the first MTD for VAT return is due. You’ll need your existing Government Gateway ID and password to hand, along with your VAT registration number.

HMRC will send an email within 72 hours confirming that you can submit your MTD for VAT returns.

If you are already using an accounting software package, in all likelihood this transition won’t affect you. Your only real responsibility will be to register with HMRC and ensure that the software you use is MTD-compatible and communicates directly to HMRC. For those who aren’t yet using software, this is the perfect opportunity to find the right package for you – the visibility offered by this technology is unrivaled.

Choose compatible software suited to you

 If you already use software to prepare your accounts and VAT returns, the only thing you’ll need to check is that it’s MTD for VAT-compliant. These solutions come in two forms:

 1. Compatible software that allows you to keep records and submit VAT Returns via the product

2. Bridging software that can connect non-compatible software (spreadsheets, for example) to HMRC’s systems.

Don’t forget to sign up

Once you’ve chosen your preferred route, you need to sign up for your business. There you will be asked whether or not you have a solution in place and that it is indeed HMRC-approved.

Following the completion of the process, HMRC will send you a confirmation email within 72 hours. Wait until you receive this before submitting your VAT Return, otherwise, you risk duplicating the process. Once done, you can use your VAT online account to manage payments and keep track of deadlines.

If your tax period is between April and July, provided you’ve done all of the above, you’re certain to be compliant. In addition, you’ll be the first to recognise the time- and money-saving benefit of using VAT solutions for your organisation.