HMRC urges VAT-registered businesses to sign up for Making Tax Digital (MTD) for VAT and take the necessary steps to ensure they are prepared before it becomes mandatory on the 1st April 2022. Continue reading to discover how to prepare for MTD for VAT.
What is Making Tax Digital for VAT?
If you have not yet signed up to MTD for VAT, HMRC is advising you to sign up soon to ensure you are ready in time for the April 2022 deadline.
Joanna Rowland, HMRC’s Director General for Transformation, said:
“Making Tax Digital is fundamental to the delivery of a trusted and modern tax system, making it easier for businesses to get their tax right and supporting the UK to go digital.
By signing up for Making Tax Digital, we expect most businesses to experience long-term benefits, including reduced errors and time saved in managing their tax affairs.
We encourage businesses to explore digital record-keeping for their VAT affairs and use this time to choose the right software to support their business needs.”
How to prepare for Making Tax Digital for VAT
Speak to your accountant or bookkeeper if you have one
Many accountants and bookkeepers already use software equipped to file and report your business records in line with the new MTD legislation. And if they are not, then chances are that they have a plan in place to implement the necessary changes in time for April.
Familiarise yourself with the Making Tax Digital for VAT requirements
There is a lot of information online to get you up to speed with the new requirements. HMRC’s MTD for VAT page provides a wealth of information about the records you must keep digitally, how to keep them using compatible software packages or other software, how to sign up for MTD for VAT, and how to send your VAT return.
It is helpful to familiarise yourself as soon as possible as you will be required to keep the following records digitally:
- Your business name, VAT registration number and business address
- Any VAT accounting schemes you use
- The VAT on goods and services you supply, for example, everything you lease, sell, transfer or hire out (supplies made)
- The VAT on goods and services you receive, for example, everything you buy, lease, rent or hire (supplies received)
- Any adjustments you make to a return
- The ‘time of supply’ and ‘value of supply’ (value excluding VAT) for everything you buy and sell
- The rate of VAT charged on services and goods you supply
- Reverse charge transactions
- Your total daily gross takings if you use a retail scheme
- Items you reclaim VAT on if you use the Flat Rae Scheme
- Your total sales, and the VAT on those sales, if you trade in gold and use the Gold Accounting Scheme
You will also need to keep digital copies of documents that cover multiple transactions made on behalf of your business:
- A third party business
- Employees for expenses in petty cash
- Volunteers for charity fundraising
Sign up for Making Tax Digital for VAT
Before you register for MTD for VAT, you must have compatible software.
To sign up, you will need:
- A Government Gateway user ID and password – you can create one if you do not already have one
- Your business email address
- Your VAT registration number and latest VAT return
You’ll also need:
- Your National Insurance number if you’re a sole trader
- Your company registration number and Unique Taxpayer Reference (UTR) if you’re a limited company or registered society
- Your UTR and the postcode where you’re registered for Self-Assessment if you’re a general partnership
- Your UTR, the postcode where you’re registered for Self-Assessment and your company’s registration number if you’re a limited partnership
If you already pay by Direct Debit, it is advised not to sign up too close to the date your return is due, or you may pay twice.
To avoid this, do not sign up less than:
- 7 days before your return is due
- 5 days after your return is due
If you do not pay via Direct Debit, sign up at least 3 days before your return is due.
Bluebird Accountancy is already supporting businesses in Making Tax Digital for VAT
Bluebird Accountancy is committed to supporting contractors and freelancers affected by the changing legislation and will ensure your business transitions seamlessly to the new reporting requirements. Our accountancy software provider (FreeAgent) is already equipped to handle ongoing VAT reporting and ensure your business records are stored and reported according to MTD legislation.
If you would like to find out more about our limited company accountancy service and how Bluebird Accountancy can support your business, please give us a call on 0808 301 2389. Alternatively, please complete the short form on our website, and one of our expert consultants will be in touch to discuss your accountancy options with you.