If you’re a VAT-registered business, you’re now legally required to file your VAT returns using software that’s compatible with Making Tax Digital (MTD). Simon Hague, RedSky’s Head of Account Management, sums up the new rules, including HMRC’s 1 November deadline…
What is MTD?
According to HMRC, errors and avoidable mistakes on returns from businesses in all sectors are contributing to more than £9 billion lost annually in tax. MTD is a government initiative that aims to address this tax gap by simplifying the UK tax system, moving it online, receiving quarterly or monthly digital returns and requiring digital record-keeping.
What’s the urgency?
If you’re VAT-registered and haven’t yet signed up for MTD, you need to get cracking.
If you file your VAT returns quarterly or monthly, you won’t be able to use your existing VAT online account from the start of November 2022 (for annual VAT returns, the deadline is 15 May 2023). If you don’t sign up for MTD and/or fail to file your VAT on time, you could be penalised.
What do I need to do now?
If you haven’t signed up for MTD and aren’t yet using compatible software, here’s what you need to do:
- Choose the right MTD-compatible software for your business
- Check that the permissions allow the software to work with HMRC
- Maintain digital records for your VAT returns
- Sign up for MTD
- File your VAT returns using MTD-compatible software.
What’s in it for me?
MTD for VAT is very good news for UK VAT-registered businesses because it:
- Speeds up and simplifies tax filing
- Automates many previously manual tasks
- Reduces the risk of human error
- Identifies anomalies automatically
- Makes tax filing closer to real-time
- Speeds up the VAT claim and reimbursement processes
- Enables you to process things like invoices and expenses ‘on the go’, rather than as an end-of-month task
- Provides real-time financial clarity, enabling you to plan more effectively and anticipate challenges.
Is MTD just for VAT-registered businesses?
Yes, but VAT is just the tip of the iceberg. HMRC will be rolling out MTD in phases. Here’s what we know so far:
- Individuals and businesses that submit income tax self-assessment returns will have to do this through MTD from April 2024
- Businesses and landlords with an annual turnover above £10,000 will have to sign up for MTD by April 2024
- MTD for Corporation Tax is also on the horizon… but probably won’t materialise before April 2026.
How can I find out more about MTD for VAT?
There’s a wealth of additional information available at GOV.UK, including how to apply for exemptions and software discounts.
How can RedSky help?
We specialise in developing and delivering innovative software solutions for the construction industry. We know
a lot about MTD and its requirements because we have been involved since its inception – we are an active member of the British Application Software Developers Association (BASDA) working group, which contributed significantly to the government’s MTD consultation.
Our award-winning construction ERP solution is fully compatible with MTD. Our customers now use it routinely to record their MTD information securely in the correct digital format – and to complete and submit their VAT returns easily, quickly and accurately.
To find out more about RedSky’s MTD-compatible construction ERP solution, request a demo or get in touch by filling out a contact form or giving us a call at +44 020 3002 8600.