Making Tax Digital for VAT – Preparing Your First Return
On 1st April 2019, Making Tax Digital (MTD) for VAT went live. However, with many businesses still to file their first VAT return under MTD, is your business ready for MTD for VAT? Below are the few hints and tips to get your business ready for its first successful MTD filing.
I’ve not signed up for MTD for VAT yet – what do I do?
Although the first filing deadline for MTD for VAT has already been and gone (7th June 2019 was the first submission deadline for businesses that file monthly VAT returns), there are still businesses out there that need to sign up for MTD for VAT.
If this is the case for your business, then before signing up, check that your business is firstly within the scope of the regime. Typically, if your business has a taxable turnover of over £85,000, then it is likely within the remit of MTD for VAT, although businesses can also voluntarily opt-in to the regime.
If your business needs to follow the new rules under MTD for VAT, check when you should start following them. Most businesses have mandated MTD for VAT since 1st April 2019. However, some businesses are subject to a deferral until 1st October 2019. HMRC should have advised you if your business falls within the deferral.
According to HMRC, you should “Follow the rules [for MTD for VAT] from your first VAT return period starting on or after 1st April 2019, unless your business is in the deferral group.” Your business should also “Start keeping digital records from the date you start following the rules”.
Once you’ve established your MTD for VAT start date, you should consider when to sign up, as the timings differ depending on whether you pay by Direct Debit or not.
If you pay by Direct Debit, then sign up “at least 7 working days before or 5 working days after your return is due.” If you do not use Direct Debit to pay, sign up “at least 72 hours before your return is due.”
Note that you should also have compatible software in place before signing up.
What is MTD for VAT-compatible software?
In order to comply with MTD for VAT, your business should have software in place that allows you to keep digital records and file VAT returns.
Broadly, there are two types of software that businesses can use – a compatible software package that meets both the record keeping and VAT return filing requirement, or bridging software, which provides a connection between non-compatible software and HMRC’s systems. Bridging software is a solution that is likely to appeal to businesses that place a heavy reliance on spreadsheets.
DataTracks’ bridging software – Oxbow – a cloud-based solution that also offers multi-user access – has been recognised by HMRC as compatible with MTD for VAT.
Will it take a lot of work to get my business ready?
How much work it’ll take to make your business compliant with the new MTD for VAT rules is dependent on many factors, including how digitised your record keeping and return filing processes already are, whether you need to change software provider, and how informed your staff are about the new rules.
Despite the challenges that some businesses may face when adapting to the new MTD for VAT regime, there are a lot of benefits that the new requirements, mainly digital record keeping, can bring, from having a more transparent overview of records to a move towards real-time reporting.
CLick on to know more about how to Make Tax Digital (MTD) for VAT filing.
To find out more about DataTracks’ MTD for VAT software solution, speak to a member of the team on 020 3608 8035 or email us at firstname.lastname@example.org.