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We are committed to delivering the highest level of professional competence and expertise at a cost effective price. Whether you are a company, partnership, sole trader or a sub-contractor, we are here to help you with your accounts, self assessment, etc.

352 Herringthorpe Valley Rd

Stag, Rotherham

S60 4LA

e: info@branagans.co.uk

t: 01709 327 215

Please feel free to visit or contact us during the following times:

Monday-Friday*  :

*Please contact us if you require an out of hours appointment

9AM to 5PM

© 2022 Branagans Accountancy Services Ltd | Company Number: 5965462 | VAT Number: 917 8490 87

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BRANAGANS

Accountancy Services Ltd

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01709 327 215 | info@branagans.co.uk

Making tax digital is the process to implement HMRC's plans to modernise the tax system, to help businesses keep a better track of what taxes they may owe, allowing HMRC to review figures almost immediately and reduce the human error through data inputting.

Making tax digital for businesses is being introduced tax by tax.

Making Tax Digital for VAT means using software for the following tasks:

This means you can no longer submit VAT Returns manually via the HMRC website. You'll need to use software instead.

As your accountant we can submit VAT Returns on your behalf, but you'll still need to use software for your VAT accounting.

We’ve created a Q&A section below that will hopefully answer any other questions you may have but if you wish to know more then please contact us.

What is it Making Tax Digital (MTD)?

When will the scope of MTD for VAT expand?

In April 2019 MTD for VAT became a legal requirement only for VAT-registered businesses over the registration threshold (currently £85,000).

In April 2022, a new stage will be introduced.

Making Tax Digital for VAT will then apply to all VAT-registered businesses, including those voluntarily registered for VAT, regardless of turnover.

Is Making Tax Digital for VAT compulsory?

MTD will be compulsory for ALL VAT registered businesses from April 2022.

What records do businesses need to keep digitally?

MTD for VAT requires you to keep some records digitally:

  • Your business name
  • The address of your principal place of business
  • Your VAT registration number
  • Details of any VAT accounting schemes that you use
  • Most businesses will need to record for each invoice (or “supply” in the VAT Notice terminology) the time and date of supply (tax point date), the net value (excluding any VAT) and the VAT rate used to calculate VAT

Some businesses will need to keep more or less information depending on their VAT scheme and circumstances.

If you print or even handwrite invoices or receipts, then you’ll need to transfer the VAT accounting information to your accounting software before you submit your VAT Return.

Remember not to destroy the paperwork because you could require it for other aspects of your accounting.

What was the soft-landing period?

When MTD for VAT started in April 2019, HMRC gave businesses a soft-landing period, allowing them to continue copying and pasting data for their VAT accounting without penalties until April 2020. Ordinarily, this was prohibited because of MTD’s digital linking rules.

At the beginning of the coronavirus pandemic, HMRC decided to extend the soft-landing period to April 2021.

However, this period has ended, and there are no signs HMRC will allow a similar period as of April 2022.

Therefore, any business switching to MTD for VAT needs to ensure digital links are used throughout their VAT accounting.

There are strict rules on what defines a digital link for MTD. According to HMRC, they have two characteristics:

  • Data is transferred electronically between software programs, products, or applications
  • The transfer is automated. It doesn’t need manual intervention such as copying over the data by hand or manually moving data between two or more pieces of software. But you can click a button to initiate the process
What should you be doing to prepare for MTD for VAT?

The critical difference between MTD for VAT and how you may have been filing VAT Returns before is that you must now use software for your VAT accounting and file VAT Returns using software.

You probably have to use an MTD for VAT feature within cloud accounting software, where data is stored securely online.

If you aren’t using cloud accounting software or are using older software (or even no software at all), you will need to plan an upgrade path to be ready in time for your first full VAT period after April 2022.

What about VAT special schemes?

MTD for VAT applies if you use VAT schemes offered by HMRC, such as the flat rate, margin, or retail schemes.

How do I register for MTD for VAT?

If you’re VAT-registered, then you can register for MTD for VAT at any time. This is true even if your business isn’t yet legally required to register for VAT until April 2022.

MTD enrolment is automatic if you’re signing up for VAT for the first time.

However, if you’re voluntarily registered for VAT, the latest you must register for MTD for VAT is before the end of your first full VAT period following April 2022.

If you’re already registered for VAT, your business won’t be enrolled automatically for MTD.

The registration process involves logging in with the Government Gateway account for your business. You might have used this previously when filing VAT Returns via the portal website.

If you don’t have an account, create one with an email address.

Note that once you’re registered for MTD for VAT, you will probably need to activate the MTD functionality in the software.

This will require your MTD login details.

What information needs to be submitted?

To register for MTD for VAT with HMRC, you’ll need to input the following information when requested upon visiting the MTD for VAT registration website:

  • Your Government Gateway ID and password
  • Your company’s VAT number (which you’ll find on your VAT registration certificate)
  • The date your business became VAT registered (again, found on your VAT registration certificate)
  • The postcode of the principal place of business (the place where your company carries out most of its business activities and/or keeps its financial and business records)
  • The Box 5 amount from your most recent VAT Return, which is to say, the amount of your last VAT Return
  • The month you submitted your most recent VAT Return

You will need to inform HMRC during registration which MTD-compatible software you’re using for your VAT accounting, so you will need to make this decision ahead of time.

Who can file the MTD for VAT Return?

You can file the VAT Return, or your accountant can do so on your behalf.

They will use their HMRC Agent Services account to do this and will need to register on your behalf with HMRC, so you should discuss this with your accountant well ahead of time.