Making Tax Digital for VAT: 6 simple tips to get your business ready

By Henry Williams on Small Business UK - Advice and Ideas for UK Small Businesses and SMEs

Making Tax Digital for VAT requires you to keep digital VAT records and submit VAT returns using compliant software. Failure to do so could result in penalties.

But don’t worry if you’re feeling uncertain or wary about the coming changes. Just follow these six simple tips and you’ll be ready for MTD for VAT.

1. Check the deadlines for your business

You need to be aware of 3 separate deadlines for MTD for VAT.

• Following the rules – you must start keeping digital records from the first full VAT period that starts after 1 April 2022
• Signing up – to avoid overlap with the existing system, you must sign up for MTD for VAT either seven days before your first return is due or five days after your first return is due
• Submitting your first return – your first quarterly return must be submitted one month and seven days after the end of the VAT quarter at least (e.g. by 7 October 2022 for VAT period beginning 1 March

2. Choose MTD-compliant software

You need to already be using MTD-compliant accounting software in order to register for MTD for VAT. Ask your software supplier or check the HMRC website if you’re unsure.

3. Ask your accountant

Your accountant is your best resource when it comes to MTD for VAT. They’ll be very familiar with the process after the first wave of onboarding in 2019, and will be able to give you tailored advice on how to prepare and make MTD for VAT work for you. You may also be able to link your accounting system to theirs to give them easy access to essential data.

4. Educate your team about MTD for VAT

MTD for VAT affects all your accounting processes and any staff involved in those processes. From purchasing to sales and finance, make sure everyone in your organisation is ready to adapt to digitisation. Team leaders can read HMRC’s VAT Notice 700/22 and be responsible for ensuring compliance across their departments.

5. Prepare for the next phases of MTD

MTD for VAT is just the start of HMRC’s plan to digitise the tax system.

From April 2024, sole traders and landlords with income over £10,000 per year will have to comply with MTD for Income Tax. From 2025, it will also apply to general partnerships. Then, in April 2026, MTD for Corporation Tax will be introduced.

Those dates might seem a long way off, but the more work you do now to prepare your processes, the easier it will be to adapt to MTD for Income and Corporation tax when they eventually arrive.

6. Check whether your business has to comply or not

HMRC will consider exceptional circumstances as a valid reason for exemption from MTD for VAT, such as inability to use a computer or go online due to a disability or religion, or living somewhere so remote that there’s no internet connection.

If you think you fall into this category, you’ll need to call the HMRC helpline and make your case for exemption to customer support. They’ll consider your personal circumstances and make a decision based on the facts.

What next?

If you follow the above steps, you have nothing to worry about with MTD for VAT. HMRC’s aim is just to make the tax system fairer, easier, and more transparent for all.

If you’re still unsure, or you want more advice and guidance, you can find plenty of information on Sage’s Making Tax Digital hub.

This article was written as part of a paid-for content campaign with Sage

Read more: How to use MTD to get VAT right

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