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HMRC’s online VAT portal closes on 1 November 2022; for non-exempted VAT-registered businesses who will no longer be able to use the existing VAT online account to file quarterly or monthly VAT returns. This will be applicable to all VAT registered businesses unless an exemption has been granted by HMRC. If they are still not compliant with Making Tax Digital by that date, these businesses risk paying fines from 1 January 2023.
Read on to find out more about when this change is happening, why it is going ahead and what it will mean for your business.
When will the HMRC VAT portal close?
HMRC’s online VAT portal will close on 1st November 2022. This means that, from this date, VAT registered businesses across the UK will be prevented from filing their tax returns via their online VAT account.
These means all VAT registered businesses will need to have switched to MTD-compatible software by this point in order to file their monthly or quarterly VAT reports, or risk paying fines.
However, the online VAT return will remain for businesses with a digital exclusion exemption, although these firms need to apply for this exemption by the portal closure date.
Key dates for the introduction of MTD
The Chancellor begins the process of MTD with reforms signalling the ‘death of the annual tax return’.
1st April 2019
MTD becomes mandatory for all VAT-registered businesses with a taxable turnover over the VAT registration threshold (or £85,000). This applies to sole traders, limited companies, trusts and more.
1st April 2022
MTD becomes mandatory for all VAT-registered businesses regardless of taxable turnover, except for businesses with an exemption.
1st November 2022
HMRC’s online VAT return closes, meaning tax returns for non-exempted VAT-registered businesses must be submitted with MTD-compliant software, or else risk paying fines.
1st January 2023
The new penalty system for MTD non-compliance begins, with a penalty point issued for those who miss specific deadlines.
Self-employed businesses and unincorporated landlords with taxable turnover over £10,000 report to MTD for Income Tax.
General partnerships join MTD.
Why is the HMRC online portal closing?
The VAT online portal closure comes as part of the gradual move to MTD (Making Tax Digital) that will allow all businesses to submit their VAT returns online with MTD-compatible software.
HMRC has closed the online portal to ensure that all applicable businesses file their VAT returns using an MTD-compatible method.
Which businesses will be affected by the VAT portal closure?
MTD for VAT has applied for all businesses with a taxable turnover over £85,000 since 1 April 2019, as this is the VAT registration threshold. However, since 1 April 2022, MTD requirements have applied to all VAT registered businesses.
According to the Tax Faculty, around 10% of businesses above the VAT threshold, and 55% of businesses below it, have still not yet signed up to MTD for VAT (as of 23/08/22). It is imperative that these businesses sign up as soon as possible in order to avoid being penalised.
If a business has previously submitted their tax returns online, it does not necessarily mean they are fully MTD-compliant. The full sign-up process for MTD for VAT must be completed.
Businesses that file their returns annually can still access the VAT portal until 15 May 2023.
You can find the link to sign-up for MTD for VAT here.
What are the penalties for non-compliant businesses?
Should a VAT registered business not comply with the changed rules that accompany the VAT portal closure, they run the risk of being faced with penalties.
These penalties could consist of a default surcharge, or late submission fines plus interest from January 2023 onwards.
HMRC has written to businesses who have not yet signed up to the MTD scheme but has not yet charged anyone with the relevant filing method penalty.
Get MTD-compliance help with QuickBooks
With the closure of HMRC’s VAT return portal and the increasing severity of non-MTD compliance for all businesses across the UK, it has never been more important to practise accurate and thorough bookkeeping.
QuickBooks is on hand to help small businesses transition into the digital tax landscape. Our range of HMRC-compatible software packages enable your business to submit VAT returns and keep digital records in the process.
If you’re not sure of which software you will need to complete the transition, take a look at our Making Tax Digital hub, containing useful information you will need upon which to become compliant.
Meanwhile, for further context and helpful advice on Making Tax Digital for VAT, read our comprehensive MTD guide.
Remember, after the VAT return portal closure on November 1st 2022, there will be no option but for VAT registered businesses to adhere to the rules, so taking steps now could prevent nasty surprises come November.
All set for the closure of the VAT portal? QuickBooks can help you overcome MTD-compatibility concerns with simple software designed for your convenience.