Date posted: 13th Jun 2019
Many people mistakenly believe that MTD will happen automatically. That is definitely not the case and ACTION MAY BE REQUIRED BY YOU.
If you are caught by MTD for VAT and have taxable turnover over the VAT threshold (currently £85,000) you are required to keep ‘digital records’ and ‘make VAT submissions’ digitally for VAT returns commencing on or after 1 April 2019.
To comply with the new legislation, you also have to ‘sign yourself up’ to MTD.
What you must do
Assess when MTD for VAT affects you (there are very limited deferrals and exemptions).
Once caught and only after submitting and paying your final ‘non-MTD’ for VAT return. Visit the HMRC website to ‘Sign up your business’.
You will need:
To be able to confirm that you are able to meet the requirements with suitable software
• Your Gov.uk login credentials
• Your business information, such as;
o Principal address, postcode
o VAT registration number
o Company registration number
o Unique Tax Reference (UTR) number
It usually takes 72 hours for HMRC to accept your business into MTD. They will email you to confirm once accepted.
Once you have signed up and been accepted you will need to authorise your software to digitally connect with HMRC. This is usually found within the VAT settings.
For more on the requirements see here or visit our FAQ.
A few words of warning:
- Businesses that currently pay VAT by Direct Debit cannot sign up in the 7 working days leading up to, or the 5 working days after their VAT Return is due
- Keep your VAT filing receipt. We have heard of cases where HMRC have failed to take Direct Debits under the new system, therefore your VAT filing receipt is your proof of submission
- On a number of occasions HMRC have not been able to match up the sign up records (they need to match HMRC records perfectly, including full stops and spacing). Where this is the case it often results in lengthy telephone calls wait times to speak to HMRC
- Once you have successfully signed up, the old method of submission (usually via the HMRC website) is closed to you. So don’t sign up if you have no ability to submit via software or your return may end up being late and incur a surcharge
- Your digital record needs to be for the ‘whole’ VAT period that is caught
- Some of our clients have ‘accidently’ signed up to MTD too early. Once you have signed up for MTD for VAT you cannot leave it. Even if your turnover drops. So only sign up when necessary
- Penalties for non-compliance with MTD are likely to be introduced from 2020, however indirectly some businesses are suffering penalties from not being able to submit in the old way
What’s happening next
This is just phase 1 of MTD. With effect from April 2020 your VAT records need to flow through an uninterrupted ‘digital journey’ to HMRC. This means no re-keying from one system to another, not summarising or cutting and pasting of data. MTD will later expand out from just VAT to include quarterly reporting for income tax and corporation tax. Keep watching our website for further details as they emerge.
If you would like a review of your current MTD compliance, advice on accounting systems or a walk through the sign up procedure then please contact your local Clive Owen LLP office.