VAT Returns Must Be Filed Through HMRC-Approved Software
All VAT-registered businesses are required to submit their VAT Returns using compatible and approved software. This means that direct submissions via HMRC’s website are no longer permitted.
Don’t Panic!
Your accountant can still submit the VAT Return on your behalf, or you can choose an HMRC-approved software solution.
What Is HMRC’s Plan with Making Tax Digital for VAT?
HMRC has stated that it will not expand the scope of Making Tax Digital (MTD) beyond VAT-registered businesses until the system has proven successful. In a July 2020 announcement, they indicated that widespread compliance won’t be required until 2024. This timeline allows for thorough testing of the system and promotes the adoption of digital record-keeping.
Digital Record Keeping
The primary requirement for MTD is maintaining records digitally using third-party software. If you’re already doing this, the impact may be minimal. However, if you’re not yet keeping digital records, it’s advisable to start now to become familiar with the process before it becomes mandatory.
Quarterly Updates and Tax Estimates
Businesses will need to provide quarterly updates to HMRC using their digital records. This is a significant shift in obligations. While many businesses already manage their records effectively, those who do not may find this an added burden. However, these updates will provide greater certainty about your tax liability throughout the year.
More Frequent Payments
Although not yet confirmed by HMRC, MTD could allow businesses to pay tax more frequently, potentially on a voluntary basis. This would differ from the current system, where businesses pay their tax bill annually after the financial year ends. Given that Real Time Information was introduced for payroll in 2013, it’s likely similar changes will occur under MTD.
Frequently Asked Questions
How Do I Become Compliant with Making Tax Digital?
To become compliant with Making Tax Digital (MTD), you need to use government-approved software to record your accounts and submit your finances to HMRC. You can find suitable options using HMRC’s software search tool. Alternatively, you can engage a reliable accountant who already uses MTD-compliant software—like MyTaxDoc—to handle everything for you. We know what we’d prefer to do!
If you have any questions or need assistance, feel free to reach out!
Is MyTaxDoc Making Tax Digital Compliant?
Yes! At MyTaxDoc, we use software that is fully compliant with Making Tax Digital (MTD). If you want to avoid the stress of setting up a new digital system, contact us today to see how we can ensure your accounts meet MTD requirements.
What Are MTD Digital Records and What Do I Have to Keep?
Keeping digital records is a key part of MTD. You’ll need to store your records in a digital format, either on a computer or in the cloud. If you use handwritten invoices or receipts, you’ll need to transfer that information into MTD-compliant software before submitting your returns, or let your accountant handle it.
Importantly, you still need to keep original paperwork, as HMRC may require it during tax investigations. Most businesses should retain paperwork for at least six years, while VAT MOSS businesses need to keep it for a minimum of 10 years. HMRC accepts digital copies, so scanning and storing documents can save space. If you prefer traditional methods, send us your paperwork—we can digitise it for you, keeping you compliant with current and future MTD rules.
Isn’t It Free to Submit My Own Self-Assessment Tax Return on the HMRC Website?
Yes, submitting your Self-Assessment Tax Return directly on the HMRC website is free and often straightforward. However, mistakes can happen, which could be costly. Think of it this way: would you cut your own hair just because it’s free? For only £75, a qualified accountant can complete and submit your tax return, giving you peace of mind and freeing up time for what really matters in life.
Will I Have to File My VAT Return More Often Due to MTD?
Currently, no. Making Tax Digital won’t change how frequently you need to submit your VAT return; you’ll still send the same information. MTD will alter how you record your finances and how you submit your quarterly VAT return to HMRC.
Will Making Tax Digital Affect Sole Traders?
Yes, if you’re a VAT-registered sole trader with a turnover above £85,000, MTD rules apply. Eventually, MTD is likely to extend to all businesses with a turnover over £10,000, as well as most individuals who submit tax returns, including the self-employed and landlords.
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