Making Tax Digital for VAT checklist: How to get up to speed with MTD for VAT


The digital tax revolution is here.

If you have a VAT-registered organization, you should use Building Tax Electronic (MTD) for your VAT accounting.

You need to post VAT Returns applying “functional appropriate software” and digitally retail store your VAT accounting information.

This Earning Tax Digital checklist will enable you get up to velocity with MTD for VAT.

And that is actually critical for the reason that HMRC is getting in touch with companies that need to be following Generating Tax Electronic in advance of them filing their initial VAT Return utilizing MTD for VAT.

If your following VAT Return submission is on the horizon, you’ll want to consider be aware.

The important factor to know is that it’s no extended be achievable to submit VAT Returns manually by means of HMRC’s web-site. You have to do it with program.

This is a important adjust from in advance of, and you need to have to know how to make a Creating Tax Electronic VAT Return submission.

This Earning Tax Digital checklist covers the following:

Figure out if your business enterprise is impacted by MTD for VAT

If your enterprise is VAT-registered, you require to use Making Tax Electronic for VAT.

Earning Tax Digital is about additional than merely submitting your VAT Return digitally. You are also lawfully expected to digitally retailer some of your VAT details (regarded as electronic report keeping).

And if you use additional than 1 piece of program to retail outlet your VAT details and do your VAT return, they need to be “digitally linked”.

The transition might have been rather clear-cut if you ended up presently using accounting software program.

It could include minimal additional than signing up for MTD for VAT, then activating the attribute in your computer software.

Alternatively, your accountant may have done this for you.

However, this may not have been the case if you experienced utilised more mature application. You will need purposeful suitable computer software.

If you’re using spreadsheets or other manual documents to prepare your VAT Return, you should have replaced this with a application-driven tactic for recording VAT facts and filing VAT Returns.

Exemptions and deferrals from MTD for VAT

Some corporations can assert exemption from MTD for VAT mainly because HMRC accepts they are deemed digitally exempt.

This includes people whose religious beliefs are incompatible with the necessities or those people whose age, disability or remoteness mean it’s not fairly realistic for them to use digital equipment.

Insolvency processes also have an affect on MTD for VAT.

Get in touch with HMRC via its VAT helpline for extra information and facts and prepare substitute actions.

Perform out which enterprise processes to adapt for MTD for VAT

You must appear at all your procedures all over generating your VAT Return. When this may well be time-consuming, the financial investment may well be vital to keep away from penalties.

Listed here are some examples:

  • How do you elevate income invoices?
  • How do you seize costs?
  • Do you use a income accounting scheme, or are you invoice-primarily based?
  • What other regions of your VAT accounting are continue to paper-based or exist outdoors of your accounting application?

For illustration, while Making Tax Digital for VAT doesn’t indicate you can no extended build paper-based mostly notes or invoices.

It means some of the bill-degree info has to be transferred into your MTD-suitable computer software.

You can no lengthier update your accounting software package with the regular monthly complete of all invoices.

If you have entry to an accountant, you may possibly obtain it valuable to discuss to them about these troubles and likely use their expertise to evaluate your existing processes successfully.

If your business enterprise takes advantage of an alternative VAT scheme such as the Flat Rate, Retail or Margin Plan (which include the Tour Operators Margin Plan)—or group VAT—your specifications and procedures will be diverse.

Guarantee you have purposeful suitable software for MTD for VAT

Use software program suitable with HMRC’s Making Tax Electronic for VAT programme.

In addition to trying to keep digital documents relating to your VAT, the application should be able to talk with HMRC’s computers so you can file your VAT Returns.

In technological language, this is in some cases referred to as “connecting to HMRC’s APIs”.

If you are making use of desktop accounting software package (mounted on your pc and facts is stored there—which can make knowledge sharing more difficult), you may need to have to update it for MTD if you have not up-to-date it not too long ago.

Speak to your computer software seller quickly about this.

Older software package may possibly not have been updated for MTD, so you may possibly have to transfer your VAT accounting (at least) to additional modern day program to file returns.

If you’re making use of a cloud accounting application bundle (where knowledge is saved in the cloud and accessible in authentic time on any device—computer, cellular telephone, tablet), it must update routinely for MTD.

Whilst yet again, you may perhaps want to communicate to your program vendor for particulars on how to accessibility the performance.

If you continue to keep your VAT data applying a spreadsheet, it may be attainable to use MTD-compatible bridging software to file returns.

But the procedure will not be as inherently robust or intuitive as applying accounting software.

It is so simple to delete data in a spreadsheet or crack a formula accidentally—and it could suggest you are no for a longer period lawfully compliant with MTD for VAT.

Inspite of rumours to the contrary—and even with the point that MTD for VAT is legally mandated (and enforced with fines for failing to comply)—HMRC has in no way designed any no cost close-consumer application readily available for MTD for VAT, or offered any software package by other signifies, these types of as membership.

Enterprises will have to receive practical suitable program from third get-togethers.

Function out when to switch to MTD for VAT

MTD for VAT has been up and operating because April 2019, so you can make the change now.

You need to have to register for MTD for VAT and then activate the function in your accounting software package.

Final thoughts on Generating Tax Electronic

Working with company admin and compliance can be a obstacle.

But when adapting to Building Tax Electronic for VAT rules could appear like a load, there are definite very long-time period gains to be mindful of.

You can successfully offer with your VAT Returns and stay on the right side of HMRC.

Maybe, just as importantly, you will have improved visibility of your business enterprise finances and will continue to keep good information, so you know how matters are performing at any time.

MTD for VAT will be a support, not a hindrance, to you and your small business.

Editor’s note: This write-up was originally posted in Oct 2018 and has been current substantially in the time considering that.


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