What’s Required For Your First Digital VAT Return

*Please note the information in this article may be out of date

The government has started to roll-out Making Tax Digital (MTD) in a bid to engineer the UK tax system so that it embraces the online era. I hope this guide will help you understand the implications.

Does your quarterly VAT period run from April to July? If so, then it’s time to prepare for your first digital VAT return submission. As you’ll be aware, the government has started to roll-out Making Tax Digital (MTD) in a bid to engineer the UK tax system so that it embraces the online era.

Citing a figure of £9 billion a year, the government argued that offline submissions (and the ‘avoidable mistakes’ they bring) are costing the Exchequer. What this means is that some taxpayers will now be required to use MTD-compatible or bridging software with direct communication to HMRC. HMRC believe this will help reduce the £9 billion tax black hole.

In order to help you prepare for 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 unrivalled.

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.

You can use the GOV.UK site to access a list of compatible software providers, but they won’t give you an overview of all the features available. The majority of solutions will have other capabilities which can assist in your accounting and even improve other areas of your business. In other words, thoroughly research each option and see how it can directly improve your processes.

Don’t forget to sign up

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

Following 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

About the writer and GoSimpleVAT software

This guide was written by Mike Parkes, who writes for Listentotaxman on Self-assessment and other digital aspects of tax reporting. His day job is managing the development of the GoSimpleTax software suite.

GoSimpleVAT is a subscription-based app that will help you navigate Making Tax Digital for VAT submissions with ease. At Listentotaxman we’re big fans of GoSimple because they make digital reporting intuitive, always up to date, and offer great value for money.

Try GoSimpleVAT free for 14 days.