Small businesses with earnings above the VAT threshold of £85,000 are now legally obliged to maintain digital records and submit their VAT return online via software compatible with the Government’s major Making Tax Digital programme.
Making Tax Digital (MTD) is designed to make it easier for small firms to calculate their tax liabilities correctly first time, saving valuable time and resources for all concerned.
HM Revenue and Customs (HMRC) confirmed that less than 100,000 firms had signed up to the new MTD for VAT service as of 1st April, the day of which the digital reporting requirement became mandatory.
This means that more than a million small businesses are yet to integrate with the MTD for VAT system.
Although HMRC will take a “light touch approach” to financial penalties in the first year of MTD for VAT – for businesses that are doing their best to comply with MTD – entrepreneurs are urged to act fast to keep up-to-date.
When should I register for MTD?
If you don’t pay your VAT by Direct Debit, registration must take place at least a week before your VAT return is due, according to the most recent HMRC notification.
Businesses paying by Direct Debit have a smaller window, due to the banking regulations. If you pay your VAT by Direct Debit, you cannot register for MTD in the 5 working days after the submission deadline for the last non-MTD VAT return and you must register at least 7 working days before your first MTD return is due. Although businesses with quarterly VAT returns will not have to file their first digital VAT return until 1st July at the earliest, they are being recommended to ensure they have MTD-compatible software in advance and are aware of the registration process.
Theresa Middleton, Director, Making Tax Digital for Business Programme, said: “Now is the time for those businesses affected by MTD who haven’t done so already to begin preparing to switchover and start experiencing the benefits MTD has to offer.
“You don’t necessarily need to sign-up from day one, but you do need to make sure you’re keeping your records digitally for your next VAT period which starts on or after 1st April.”
Samantha Skyring FCCA, Senior Training & Communications Manager at TaxAssist Accountants echoes Middleton’s statement and is encouraging business owners to make sure they’re prepared before registering for MTD.
“Make sure you know when you need to be registered for MTD by and how this fits in with your VAT return filing deadlines. We recommend you don’t register for MTD until your final non-MTD VAT return has been filed”, stated Sam.
Ahead of your first MTD for VAT return, consider enlisting the services of your TaxAssist Accountant who can act as an agent and correspond with HMRC on your behalf, whilst preparing your return using your own digital bookkeeping records.
Your TaxAssist Accountant will ensure that you claim as much VAT as possible, including contentious items such as mixed-use expenditure and vehicle running costs.