Stay compliant with Making Tax Digital for VAT

Not sure how to submit digital VAT returns? It’s easier than you think. Read our simple guide to Making Tax Digital VAT returns.

5 min read

Is your business registered for VAT? If it is, read on. The government’s new Making Tax Digital regulations have transformed the VAT system, and you need to know how this affects you.

Making Tax Digital is here

You’ll have heard a lot about Making Tax Digital in the run-up to April 2019. HMRC is entering the digital age big time, but most importantly they’re starting with VAT. So if you haven’t yet prepared for the changes, now is the time to get your head around your obligations, and how these have changed.

Most small businesses need to sign up for MTD for VAT. You can find out more about Making Tax Digital here.

So where do I start?

Set up an online VAT account. As soon as possible.

MTD rules apply from your first VAT period starting on or after 1 April 2019. You can register online with HMRC to submit your VAT returns through your Government Gateway account. If you’re not eligible to sign up yet for MTD, a message will appear at this stage.

Once you’re signed up to MTD, you’ll find it helps you stay organised as you need to record all your VAT transactions digitally throughout the year.

MTD compliant software

Now that you’re storing all your VAT records in a digital format, make sure your accounting software is MTD compliant. This is also known as “functional compatible software”, and just means it can connect directly with HMRC, for when you submit your return.

You might already be using suitable tax accounting software, like QuickBooks, in which case you’re all set. QuickBooks works out how much tax you owe, and reminds you when your VAT return is due. It even calculates VAT-related expenses you can claim back. And it’s approved by HMRC for submitting VAT returns directly under MTD.

Just so you know, if you get a VAT inspection, which is actually quite likely, all the information is there in one place, so you don’t need to do any extra work. “Being digital” will also help you steer clear of penalties for late submissions and non-payments – these can be quite substantial, and increasingly so for serial defaults or inaccuracies.

Submitting your VAT return digitally

If you’re using QuickBooks, you’ll save so much time as it does most of the work for you. It tells you what your VAT liability is for the accounting period, and all you have to do is click a button to submit your return via a digital link. It’s that simple. You can watch a 

 which shows you exactly what steps you have to take.

What if I don’t use QuickBooks?

Maybe you still use Excel – if so, you’re not alone, and we know it’s hard to ditch a method you’ve come to trust over the years. You may be doing this, too, because your VAT is complex. This doesn’t mean you’re exempt from the new regulations. You’ll still need to submit your VAT return according to MTD rules.

The good news is that you can stick with your trusted system, and use QuickBooks Bridging Software to comply with HMRC. Simply upload your spreadsheets and QuickBooks submits your return, MTD-compliant, directly to HMRC. You can see how it works here.

That sounds too complicated!

If you’re not confident moving forward with the new MTD rules and regulations on your own, don’t worry. Things can seem tricky if it’s your first time filing. This is where an accountant can be worth their weight in gold. With professional help on board, you’re free from all the worry of compliance, deadlines, and potential errors when you come to submit your returns.

Cloud accounting

With digital accounting software now the norm, accountants have more time to spend advising you and helping you grow your business. Just make sure you choose a professional who’s already embraced digital accounting solutions like QuickBooks. It’s the way to go. You can find an MTD-ready ProAdvisor here.

What if submitting my VAT return doesn’t go to plan?

Don’t worry, HMRC understand that mistakes happen. They just expect you to take “reasonable care” over your return, and will penalise you if they consider your errors to have been careless or deliberate.

So it’s important to know what to do when things go wrong, to avoid hefty fines. The main thing to remember is, so long as you act immediately to put things right, you’ll minimise any penalties you might face.

You can seek HMRC’s advice directly when things go wrong. HMRC also have very helpful VAT guides for businesses, as well as a dedicated telephone helpline.

Eliminate errors

This is the reason why HMRC are going digital – to avoid errors and streamline your submissions. And this is where using cloud-based accounting solutions like QuickBooks really pays off. If all your VAT records are digitally recorded, there’s no need for manual transcription and less room for human error. And you can feel confident when submitting your VAT return.

Did you find this article about Making Tax Digital VAT returns useful? QuickBooks cover many other business-related topics. It’s all part of the support we offer to small businesses in the UK.

Learn how QuickBooks can help you with Making Tax Digital