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What does Making Tax Digital VAT mean to me?

VAT Returns must be filed through HMRC-approved software

VAT-registered businesses with a turnover above the VAT threshold (currently £85,000) must submit their VAT Return using compatible and approved software. There is a list of approved software suppliers on the HMRC website. This means that it’s no longer possible to submit VAT Returns directly via HMRC’s website as you’ve been able to do for years. Don’t panic though! Your accountant can still submit the VAT Return on your behalf or you can choose a piece of HMRC-approved software to use. 

Businesses must now keep digital records.  Most VAT accounting records relating to the VAT Return must be kept digitally and/or using software for the statutory legal period of six years (10 years for mini one-stop shop (MOSS) businesses). 

 

 

MTD for VAT applies to almost all of the VAT-registered businesses in the UK

It isn’t possible to swerve it or opt out apart from in very specific and rare circumstances. 

And it’s here to stay. In July 2020 HMRC announced their new roadmap which tells us the dates by which everyone must file in line with MTD:

VAT-registered businesses with a taxable turnover below £85,000 will be required to follow Making Tax digital rules for their first return starting on or after April 2022.

Self-employed businesses and landlords with annual business or property income above £10,000 will need to follow the rules for MTD for Income Tax from their next accounting period starting on or after 6 April 2023.

It’s not all doom and gloom, though.

 

 

What is HMRC’s plan with Making Tax Digital VAT?

HMRC has said that it won’t widen the scope of Making Tax Digital for business beyond VAT-registered businesses before the system has been shown to work successfully. In an announcement in July 2020, they have said that it won’t be until 2023 that almost everyone will be required to file in line with MTD. 

This time frame will ensure that there is time to test the system fully and for digital record keeping to become more widespread. 

What will businesses need to do for Making Tax Digital when the scope widens? 

There are three main changes which MTD may bring to how your business does its taxes.  

Digital record keeping 

The first main requirement for businesses for MTD is to maintain records digitally using third party software. This is something you may already do, so may not actually have much of an impact on how you currently keep track of your records. For those not already keeping digital records, it would be wise to start that process now and become comfortable with it before it becomes mandatory.

Quarterly updates and a tax estimate in year 

Business owners will need to update HMRC on a quarterly basis using their digital records – a significant shift in current obligations. Many businesses already keep on top of their record keeping and accounts in order to keep themselves accountable and keep track of their finances. However, if you don’t already provide regular updates, it may be an extra burden on your shoulders. Despite the extra hassle, it will give greater certainty about your tax liability throughout the year. 

Paying more frequently 

Although it hasn’t been confirmed by HMRC or government, MTD could give businesses the opportunity to pay tax more frequently, closer to real-time and potentially on a voluntary basis. This is different to how businesses currently pay their tax bill – once per year after the end of its financial year. Given that it was introduced with Real Time Information in payroll back in 2013, it’s our prediction that it will also be introduced as part of MTD.

Is Mazuma Making Tax Digital compliant?

Yes we use software that is compliant with Making Tax Digital. If you don’t want the stress or worry or setting up a new digital system, contact us today to see how we can ensure that your accounts are compliant with MTD. At Mazuma we are perfectly positioned to do absolutely all of this new tax admin for you. In fact, we’ve been working this way since 2006!

FAQ's

To become compliant with MTD, you need to use government approved software to record your accounts and submit your finances to HMRC. You can refer to HMRC’s software search tool to find out more, or you can use a reliable accountant who already uses MTD compliant software - like Mazuma - to sort it all for you. We know what we’d rather do!
If you’re not VAT registered, we would still recommend that you use HMRC compliant digital accountancy software - especially if your business is close to the VAT threshold! It’s better to be prepared for when your business does cross the threshold. It’s also worth noting that for non-VAT registered entities, you’ll soon most likely be required to submit some sort of return up to four times a year instead of once. If it’s going to take up too much of your time, or if it’ll cost you too much money, you can use a reliable accountant - like Mazuma - for just £28 per month plus VAT to sort everything for you. No stress - we’ve got you covered.
Yes - we use software that is compliant with Making Tax Digital. If you don’t want the stress or worry or setting up a new digital system, contact us today to see how we can ensure that your accounts are compliant with MTD.
Keeping digital records is a core aspect of Making Tax Digital. From now on you will need to keep your records in a digital format, stored on a computer or in the cloud. If you use handwritten invoices or receipts then you'll have to transfer that accounting information into MTD compliant software before you submit your returns (or get your accountant to do it for you!). Keeping digital records doesn’t mean you don’t have to keep original paperwork. Quite the opposite, in fact. Original paperwork still needs to be stored as it could be required by HMRC in the event of a tax or VAT investigation. For most businesses, it means keeping paperwork for at least six years, though for many (VAT MOSS) it is a minimum of 10 years. HMRC will accept digital copies of receipts and invoices, so you could scan documents and store them to save on storage space in the office. But who has time for that? Something we pride ourselves on at Mazuma is digitising records for our clients who don't want to use our app or their own MTD compliant software. If you prefer more traditional methods or are perhaps a little sceptical of a more digital future, you can send us all of your paperwork. We’ll scan and digitise it for you, saving you a lot of admin hassle and keeping you completely compliant with current and future MTD rules.
At the moment, no. Making Tax Digital won’t change how often you need to submit your vat return and you still have to send the same information. MTD will simply change how you record your finances as well as how you submit your quarterly VAT return to the powers at be, HMRC.
Yes, if you are VAT registered and your turnover is above £85,000, then the rules apply - it doesn’t matter if you’re a sole trader or a limited company! And eventually it is likely to apply to all businesses with a turnover over £10,000 as well as most individuals who submit tax returns - such as the self employed and landlords.

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