From today, HM Revenue and Customs’ (HMRC) Making Tax Digital programme has become a law for more than one million VAT registered businesses earning more than £85,000.
The new rules, first announced in 2015, will mean most businesses above the VAT threshold will need to keep their records digitally and submit their VAT return using MTD-compatible software for VAT periods starting on or after 1st of April.
MTD will make it easier for businesses to get their tax right the first time. HMRC has been urging businesses to get ready and has already written to every business affected with information on what they need to do.
Nearly 100,000 businesses have already signed up to the new service. Over 4,000 businesses are now signing up to MTD every day to experience a more integrated approach to business and tax.
HMRC says it knows that businesses will require time to become familiar with the new requirements. During the first year of VAT mandate, HMRC will take a light touch approach to penalties by not issuing filing or record-keeping penalties where businesses are doing their best to comply with MTD.
“Delivering Making Tax Digital for VAT is the first step toward our ambition to create one of the most digitally advanced tax authorities in the world.The rules that come in from today will give businesses more control over their finances, allowing them to spend their time focusing on innovation, growth and the creation of jobs.”
– Mel Stride MP, financial secretary to the Treasury
“Tens of thousands of businesses joined our pilot over the last 6 months and have helped us to test and improve the live service ensuring we have the right support in place to help people transition.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 1 April”
– Theresa Middleton, director, Making Tax Digital for Business Programme
What do businesses need to do now?
HRMC says that businesses shouldn’t panic if they aren’t prepared. The first returns under the new system for the majority of businesses, who file VAT quarterly, won’t be due until August at the earliest but you need to start using digital records from today, the 1st April or whenever your next tax quarter starts.
Accountants or other tax representatives will already be aware of MTD and will advise businesses how and when they need to make changes to be ready for the new service. Those already using software will simply need to ensure it’s MTD-compatible then sign up to the new service and authorise their software for MTD.
Take steps to find out if your business is affected by the Making Tax Digital changes and what you need to do if it is. Most businesses above the VAT threshold have to start keeping their records digitally and sending their VAT return to HMRC direct from their software for VAT periods starting on or after 1st of April.
Check if you have to join
Check if and when you have to follow the rules for Making Tax Digital for VAT.
- Talk to your accountant or agent – if you use one to manage your VAT affairs – about how they are making returns MTD-compliant.
Get the right software
- Speak to your software provider if you already use software to ensure it will be compatible.
Before you sign up, you must have software that:
- lets you submit VAT Returns
- is compatible with Making Tax Digital for VAT
- Those businesses that are either not represented by an accountant and/or do not already use software will need to select software to use and sign up to MTD, then authorise their new software for MTD. The GOV.UK webpages provide information on a wide variety of products, from free software for businesses with more straightforward tax affairs to increasingly sophisticated paid solutions. There are also products that can be used in conjunction with a spreadsheet for those businesses that don’t want to change their underlying record keeping system.
Sign up for Making Tax Digital for VAT
- Sign up for Making Tax Digital for VAT at least one week before your VAT Return is due.
- You’ll receive an email within 72 hours to confirm that you can submit returns using software that’s compatible with Making Tax Digital for VAT.
- After you’ve signed up, you cannot use VAT online services to send VAT Returns.
Authorise your software
- Before you can send VAT returns, you’ll need to authorise your software.
- Ask your software supplier if you do not know how.