Businesses with an annual turnover above £85,000 are being urged by HM Revenue and Customs to sign up to Making Tax Digital before the 7 August VAT filing date.
Many of the 1.2 million businesses affected by the MTD rules, which became law for VAT periods starting on or after 1 April, will be required to submit their first quarterly VAT return to HMRC using MTD-compatible software by Wednesday 7 August. If paying by direct debit, businesses must register by Monday 29 July.
Making Tax Digital was first announced in 2015; the government claims the new system will make it easier for businesses to get their tax right and will reduce tax lost due to avoidable mistakes. According to HMRC:
- More than 600,000 businesses have already signed up to Making Tax Digital;
- Around 10,000 businesses are currently registering every day;
- About 400,000 submissions have been made using MTD software;
- 50% of farmers have already registered; while just 25% of those in the finance sector have signed up.
"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," said Theresa Middleton, director of Making Tax Digital at HMRC.
"During this first year we won't be issuing filing or record-keeping penalties to businesses doing their best to comply," she added. However, HMRC has said that sanctions could be issued in cases of deliberate non-compliance.
The MTD rules require VAT-registered businesses with a taxable turnover of over £85,000 to keep their VAT records digitally and to submit their VAT return direct from MTD-compatible software.
Businesses can sign up for MTD on the government website. If paying by direct debit, businesses should register for MTD at least seven working days before a return is due. Otherwise, businesses must register at least 72 hours (three days) before their return is due.
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. Those businesses that are registered for VAT but are below the VAT threshold are not required to use the MTD service, but can choose to do so.
Written by Rachel Miller.