The government initiative for making tax digital has been rolled out to businesses over the past couple of years. Businesses must register to be compliant and VAT registered business must complete their registration in readiness for their April 2022 VAT return.
Under the new rules, VAT-registered businesses are required to record financial and accounting transactions and submit VAT returns to the HMRC digitally using approved software. Making Tax Digital is designed to make the tax process easier for businesses to manage while improving accuracy.
VAT businesses above the £85,000 threshold have been following the new HMRC rules for digitally filed taxes single April 2019. The initiative has been rolled out to all other VAT register businesses, regardless of turnover, and fines may be imposed for those who fail to register for MTD by the deadline. As a result of the new legislation there will be no more manual filing of taxes except for in special circumstances.
Where to register for MTD.
Registration can be completed at the HMRC website and will require some information about your business and financial activity. Under the new rules, accounting processes and information storage will be affected and records and digital copies will be needed. You will also need to check the accounting software you are using to prepare your tax return to ensure that is approved and compatible for MTD.
Approved software will need to manage and store digital records in line with the new regulations, prepare VAT returns, and communicate digitally with HMRC.Normal VAT deadlines will remain in place and the financial information that businesses need to supply will remain unchanged.
What if I have problems filing digitally?
If you cannot file your VAT records digitally then you will be in default, however there are some exemptions. According to HMRC guidelines, if it is not practical or reasonable for you to file your information digitally then you may be granted an exception. This could be based on things like restrictions due to business location, or being unable to use digital filing methods due to age or disability. If your failure to comply with the rules fall outside of the accepted exemptions, then it is likely you will will receive a penalty.
Advantages of MTD
Keeping digital records under the new MTD rules can help businesses to record and store information more effectively.
It can also:
- Reduce errors from things like manual calculations, or incorrect recording of information
- Reduce the risk of audits and compliance issues.
- Help to records updated more efficiently
- Make record sharing easier between business owner, or accounting departments and financial advisors, saving time and cost.
What VAT filing information do I need to provide?
Regardless of the new rules and processes introduced, the basic function of filing VAT information still remains the same. To keep up todate and compliant with VAT returns businesses will need to contine to file their financial data as normal, but by using digital software in place of manual methods.
For business to provide VAT records in keeping with current regulations they will need to
- Complete VAT returns monthly, quartely or annually.
- VAT payment due dates will remain unchanged and will still be due on the current payment dates
- No additional records will be required or need to be kept for VAT purposes
- For accounting vsiibility spreadsheets can still be used to review or record business transactions
- Current exemptions from online filing will stay the same.
For businesses who need to register for MTD or want to find out more information, there is help available on the GOV.UK Making Tax Digital page.
