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Making Tax Digital (MTD) is a government initiative to digitise the tax system.
Introduced in 2019, MTD was made compulsory for VAT-registered businesses in April 2022, as the first phase of Making Tax Digital. If you’re VAT-registered, you must:
Submit your VAT returns to HMRC using a digital link
Keep digital records using MTD-compatible software
This means that, if you have not already done so, you must move your financial records from a paper or spreadsheet system, to MTD-recognised software. You can then send your VAT returns to HMRC digitally.
HMRC now automatically signs up businesses for MTD if they’re registered for VAT.
It’s important to comply with MTD rules if you are VAT-registered. Without MTD-compatible software, you won’t be able to submit VAT returns to HMRC and will face a penalty.
Under the new rules, businesses must keep and send digital records digitally to HMRC. These digital records will, in most cases, replace physical records entirely. This means that you won’t have to sort through reams of documents when filling out your VAT returns.
Submitting regular updates helps you see tax owed in real time
Modernising your records can help your business in the long run
Once set up, MTD can allow you to spend less time on admin
Making Tax Digital for VAT is currently compulsory for all VAT-registered businesses. However, there are some exceptions. You won’t have to follow the MTD rules if:
Your business is run entirely by practising members of a religious society whose beliefs are incompatible with the regulation’s requirements (for instance, using computers is not allowed).
You are undergoing bankruptcy procedures.
You can’t easily use digital tools to keep your business records or submit your returns - for instance due to age, disability or remoteness of location.
VAT AI Agent BETA
The VAT App in Intuit QuickBooks comes with a built-in AI VAT Agent [BETA] for QuickBooks Simple Start customers and above. It identifies discrepancies between your profit and loss report and net sales figures, to help you file your VAT Returns with confidence.
It’s important to follow the deadlines for MTD for VAT to avoid paying a penalty. Your VAT filing deadlines will remain the same as the previous VAT filing process and be either: monthly, quarterly or annually.
From April 2022, VAT-registered businesses must follow Making Tax Digital rules on their VAT return.
If you’re VAT-registered, you need to ensure you’re using MTD-compatible software. HMRC will contact you, and you’ll automatically be signed up for the scheme.
All VAT-registered businesses should now be signed up for Making Tax Digital for VAT. You no longer need to sign up yourself, and HMRC should have contacted you about it.
All businesses that earn over £90,000 have to register for VAT. You can register online through the government website, using your Government Gateway ID.
Read our helpful guide on how to register for VAT online here.
Discover more information about MTD for Income Tax current guidelines and how it could affect you.
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