Making Tax Digital for VAT started on 1st April 2019. Under this initiative, businesses with an annual turnover above £85,000 are being urged by HM Revenue and Customs (HMRC) to sign up to Making Tax Digital (MTD) before the 7 August VAT filing date.
Approximately 1.2 million businesses are affected by the MTD rules. For those businesses whose quarterly VAT period started on 1 April 2019, the first deadline for filing returns under MTD to HMRC using software is 7 August 2019.
Businesses have to register by Friday 27 July 2019, if paying by direct debit. If not paying by direct debit, businesses can register at least 72 hours (3 days) before their return is due. Make sure you have MTD-compatible software and that your last pre-MTD direct debit has come out of your bank account before signing up.
Making Tax Digital was first announced in 2015 and will make it easier for businesses to get their tax right, reducing tax lost due to avoidable mistakes.
HMRC’s reminder comes as it reveals:
– at the moment, around 10,000 businesses are registering for MTD every day
– more than 600,000 businesses have signed up in total, with some 400,000 submissions already successfully made using software
– businesses in the agriculture sector (such as farmers) have been one of the fastest groups to sign up to MTD, with 50% already registered
– the financial sector has been one of the slowest to sign up, with nearly 75% yet to sign up
Theresa Middleton, Director of Making Tax Digital at HMRC, said:
“Now is the time for businesses with an August quarterly filing deadline to sign up and join the hundreds of thousands already experiencing the benefits of MTD.”
“During this first year we won’t be issuing filing or record keeping penalties to businesses doing their best to comply.”
The rules for Making Tax Digital became law for VAT periods starting on or after 1 April 2019 and require VAT-registered businesses with taxable turnover over £85,000 to keep their VAT records digitally and to submit their VAT return direct from their MTD-compatible software.
HMRC expects MTD to reduce tax lost due to errors, thanks to the improved accuracy that digital records provide and the fact that information is sent directly from software to HMRC.
The latest tax gap figures showed avoidable mistakes cost taxpayers more than £9.9 billion last year – £3 billion attributable to VAT alone.
Background of MTD:
As a key part of the government’s plans, Making Tax Digital was first announced in 2015 to make easy for individuals and businesses to get their tax right and keep on top of their affairs.
No business will be forced to go digital for their VAT returns if they are unable to. Anyone who is already exempt from online filing of VAT remains so under MTD and there is further provision for those who cannot adapt to the new service due to factors such as age, disability, or location to apply for an exemption.
Those businesses that are registered for VAT but are below the VAT threshold are also not required to use the MTD service, but can choose to do so.