Today, we are going to look at Making Tax Digital for VAT. We will look at:
- what is VAT,
- when to register for VAT and
- how your business will be affected by Making Tax Digital for VAT.
Hi my name is Valerie Chan. I'm the Director of VF Accountants and ACCA qualified.
Are you ready? Let's go.
First of all, what is VAT?
VAT stands for Value Added Tax. It is a tax on goods and services.
We can help you register for VAT if your VAT taxable turnover is above £85,000. You can also voluntarily register for VAT if your sales are below this threshold.
Making Tax Digital for VAT is also known as MTD for VAT and it is effective from 1st of April 2022. Making Tax Digital for VAT means that VAT registered businesses:
- must file their records digitally and
- must submit their VAT returns using software.
You can pay as much as 100% tax if your VAT is wrong. So, can you take such risks?
As your agent, that is, your accountant, we can register your business for Making Tax Digital for VAT but you will not be able to submit your VAT return using HMRC website anymore. Also note that once we disconnect you from the old VAT system, we cannot go back.
Timing for registering for Making Tax Digital for VAT is crucial. If you sign up too close to the date the VAT return is due, you risk paying twice if you usually pay by direct debit.
If you do not pay by direct debit, sign up at least 3 days before your VAT return is due.
HMRC recommends that you do not sign up less than 7 days BEFORE the VAT return is due. HMRC also recommends that you do not sign up less than 5 days AFTER your VAT return is due.
We use Quickbooks Online. It is an industry leading cloud accounting system which is approved by HMRC for submitting Making Tax Digital for VAT.
If you still want to keep your records using spreadsheets then QuickBooks Online provides an MTD bridging software. The 9 boxes of your VAT return are imported from a csv file into Quickbooks Online. Your VAT return is then submitted via MTD for VAT.
I am Valerie Chan, Director of VF Accountants and ACCA Qualified. Please leave in the comments below how you're getting on with MTD for VAT and whether you need our help.
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