From Tuesday 1 November 2022, businesses will no longer be able to use their existing VAT online portal to submit their VAT returns.

By law, all VAT-registered businesses must sign up to Making Tax Digital (MTD) and use compatible software to keep their VAT records and file their returns.

Sign up now to avoid a penalty

In less than two weeks, companies that file their VAT returns on a quarterly or monthly basis will no longer be able to submit them using their existing VAT online account, unless HMRC has agreed they’re exempt from MTD.

HMRC is warning that if your business doesn’t file its VAT return through MTD-compatible software, you may have to pay a penalty. And even if your organisation currently keeps digital records, you must check the software is MTD-compatible and sign up for MTD before filing your next return.

How do you sign up to Making Tax Digital and start using compatible software?

You can register for MTD yourself or ask an agent to do this for you.

The steps to follow are:

  1. Choose MTD-compatible software (a list of software, including free and low-cost options, can be found on GOV.UK)
  2. Check the permissions in the software (once your business has allowed the software to work with MTD, you can file VAT returns easily)
  3. Keep digital records for current and future VAT returns
  4. Sign up for Making Tax Digital and file future VAT returns using MTD-compatible software

Extension for businesses due to file by 7 November 2022

If your company’s turnover is under the VAT threshold of £85,000 and you haven’t signed up to MTD in time to file your next return by 7 November 2022, you can still use your existing VAT online account for that return only.

But you must complete the steps above so you can complete any returns due after 1 December 2022 to avoid a penalty, if you file monthly or quarterly VAT returns.

Are you exempt from MTD?

If your company is already exempt from filing VAT returns online or if your business is subject to an insolvency procedure, it will automatically be exempt from Making Tax Digital.

Or if it’s not reasonable or practical for your organisation to use computers, software or the internet, you can check if you can apply for an exemption. HMRC will consider each application on a case-by-case basis.

What if your business is new?

If your business is new and isn’t yet registered for VAT, it will automatically be signed up for MTD while registering for VAT through HMRC’s new VAT Registration Service (VRS). But you’ll still need to get the right software to submit your VAT returns.

Our thoughts on Making Tax Digital

As we’re now in an increasingly digital world, it’s inevitable the tax system will become more digitalised.

It will be a long transition period as taxpayers begin to understand the new system and as HMRC builds more sophisticated systems that serve the ultimate purpose of providing accuracy and transparency.

It’s a mammoth task to bring the tax system fully into the 21st century from a compliance point of view. But once everything is in place, it should be easier for taxpayers and HMRC to work together to ensure a fair and simpler tax system. Although that may be some time to come yet!

Support with Making Tax Digital

If you need help with Making Tax Digital, get in touch with our team of experienced tax advisers on 07813 434195 or stephanie.churchill@churchilltaxation.co.uk

Steph Churchill

Stephanie Churchill

Managing director & co-owner of Churchill Taxation