Filing VAT Returns With Making Tax Digital

Making Tax Digital (MTD) has taken the UK by storm. Soon, businesses registered for VAT with a taxable turnover over the 85K threshold will have to keep and file VAT returns using software that is compatible with MTD. Because this will take place in April of this year, it’s important you learn all the ins and outs to ensure that all VAT returns you file comply with the new regulations.

At Newnham & Son, we like to keep our clients up-to-date with all the latest tax trends so that they don’t miss out. We also believe that staying in the loop allows you to be more productive. This, in turn, gives you back time to focus on revenue-generating activities within your business.

So, without further ado, let’s have a closer look at what MTD means for VAT registered businesses above the threshold.

Who does MTD affect?

As mentioned above, MTD will affect business offer the VAT threshold of £85k. However, businesses that have always been below that threshold will not have to abide by MTD regulations. This is also applicable to VAT registered businesses. That said, if you fall in this category, you can operate MTD voluntarily to prepare for future changes.

Furthermore, HMRC recently published a new public VAT notice 700/22 which addresses the impact of MTD on VAT registered businesses. This notice provides extensive information on what businesses need to do once MTD takes place.  

Limited exemptions

The majority of businesses above the threshold will have to file MTD compliant VAT returns. That said, there are some exceptions to the rules.

For example, practising members of a religious society who run the entire business. If their beliefs don’t align with the regulations, they won’t have to abide by them. This is because there are some religious beliefs that prevent individuals from using electronic devices such as computers.

Additionally, if it isn’t practical for the business or individual to use digital tools to keep records and submit VAT returns, they don’t have to. This could include those with a disability or the elderly. It also includes individuals and businesses in remote locations where the required technology isn’t available to them. This also applies to businesses who are subject to an insolvency procedure.

Keeping digital records

The majority of businesses that are within the designated threshold already keep digital records of their files. However, from now on, you will have to use MTD compliant software. This software must be able to maintain your records as is specified in the regulations. It must also enable you to prepare VAT returns using the information within these records. Additionally, you must be able to communicate with HMRC via the organisation’s API platform.

With this in mind, it’s essential you sign up for software that allows you to do all the above. At N&S, we’ve taken the necessary measures to ensure our practices align with the new MTD regulations. This means all of our clients can rest assured knowing that their businesses are compliant without them having to lift a finger.

The soft landing period

To soften the blow, HMRC is allowing a period of time for businesses to put in place digital links between all their compatible software. This period is called the “soft-landing period”.

The soft-landing period means that businesses won’t have to have digital links between software for the first year of mandation. This includes the VAT period from April 1, 2019, to March 31, 2021. However, if you transfer data after the preparation of the VAT return to another product that is API-enabled just to submit the nine-box data to HMRC, you must do so in a digital format.

Get expert advice on filing your VAT returns

The key to complete compliance is to stay informed. Alternatively, you could hire an accounting firm that knows all the new legislation and can make your transition to Making Tax Digital that little bit easier.

At N&S, we’ve done all the research so that you don’t have to. In fact, since the news of the release of MTD, we’ve been taking strides to ensure that our company only uses MTD compliant software. In doing so, we can ensure that your organisation will meet all the MTD requirements moving forward.

To find out more about our services, please contact us today. Our team has the adequate training and knowledge to give you all the information you need regarding MTD and VAT returns.