Customer Advice: How to submit a Making Tax Digital for VAT return
Making Tax Digital (MTD) is legislation from HMRC that means VAT-registered businesses above the VAT threshold (currently £85,000) must submit their VAT returns via software and keep their VAT records digitally. It came into effect on 1 April 2019.
Essentially, MTD for VAT means businesses must now use accounting software that can connect to HMRC’s systems for the purposes of filing a VAT return (or use some kind of computerised accounting process that can do so).
When is the first MTD for VAT return due?
The rule is simple: start following Making Tax Digital from the first day of your first VAT period that starts on or after 1 April 2019.
- If your VAT period has a 31 March end date, your first VAT quarter under MTD for VAT started on 1 April 2019.
- If your VAT period has a 30 April end date, your first VAT quarter under MTD for VAT is from 1 May 2019.
- If your VAT period has a 31 May end date then your first VAT quarter under MTD for VAT is from 1 June 2019.
Don’t forget that if your business is of a type on the deferred list then you don’t have to follow MTD for VAT rules until October 2019.
When to sign up and file your first return
The rules around when you can and when you must sign up to Making Tax Digital for VAT are a little complex and require careful preparation.
You can’t sign up for MTD for VAT until after you’ve filed your last non-MTD VAT return. Additionally, you shouldn’t forget the rule that a VAT return and payment must usually be filed within a whole calendar month plus seven days after the VAT accounting period ends.
However, you should always check the filing deadline for your business in your online VAT account at HMRC’s website.
HMRC offers the following guidelines as to when you should sign up to MTD for VAT, and the earliest you can subsequently file your first VAT return:
- If you pay by direct debit you must allow five working days after the filing deadline for your final non-MTD return before signing up for MTD for VAT, and must allow at least seven working days before the filing deadline to file your first return under MTD.
- If you pay by non-direct debit methods, you must allow 24 hours after your last non-MTD return before signing up, and 72 hours after signing up before filing your first return under MTD.
- If you’ve filed your VAT return late, and you pay by direct debit, you must allow five working days after filing late before signing up. If you pay by non-direct debit methods then, as above, you must allow 24 hours before signing up if you’ve filed your VAT return late.
Here’s an example for when a business filing quarterly VAT returns can sign up for MTD for VAT.
If the business has to file a VAT return for the April to June 2019 period, and it pays by direct debit, the earliest it can sign up is 15 May 2019—five working days after the previous VAT filing deadline.
The latest the business can sign up is 31 July 2019, seven days before the filing deadline, although it’s wise to do so earlier.
Those businesses that pay by non-direct debit methods can register as early as April but must allow at least 24 hours after filing their previous return before doing so.
The latest they can sign up for MTD for VAT is 72 hours before the filing deadline of 7 August, although it’s wise to sign up earlier than this.
How to register for MTD for VAT
Key to using Making Tax Digital for VAT is that your business must have registered with HMRC for the service in time for your VAT return deadline.
Your business is not enrolled automatically even though MTD for VAT is now mandatory, and even if you’ve previously filed your VAT returns using the VAT portal website.
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, you’ll be invited to create one, and will need an email address to do so.
Once the process is complete, which will take a few minutes, you’ll be emailed a Government Gateway ID. This will consist of a series of numbers.
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 principle place of business, which is to say 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 in which your most recent VAT return was submitted.
Once you’ve inputted these details, HMRC will immediately verify them, and if you’ve made any errors you’ll be invited to input the details again.
Note that verification from HMRC that your business can start submitting VAT returns via MTD for VAT might take up to 72 hours, and you should not submit your VAT return until you receive this confirmation.
This delay might run the risk of your submitting a late VAT return, so you should register sooner rather than later.
Keeping records digitally
Most discussion about implementing Making Tax Digital has focused on the digital filing of VAT returns, but the MTD for VAT legislation also says accurate, complete and readable VAT records must be kept digitally.
As per the existing VAT regulations, records must be kept for at least six years after the end of the current tax year, or 10 years for Mini One-Stop Shop (MOSS) businesses.
Accounting software should take care of this for you automatically but if you rely on another accounting method, you will need to make specific efforts to ensure the data is kept for the required period without any risk or loss or corruption.