The first Making Tax Digital (MTD) VAT submission deadline is upon us! If your business is VAT registered and has VATable sales above the VAT threshold (currently £85,000), you need to file your VAT returns that start on or after 1st April 2019 using HMRC’s new MTD system. If you file VAT on a monthly basis, this means that you need to file your 1st April-30th April VAT return through MTD-compatible software today!
If you file quarterly, your VAT submission for the quarter dated 1st April-30th June (or later) is the first that you will need to file through MTD-compatible software so you will need to make that particular submission by 7th August 2019 at the latest. The deadline for submitting the return online and paying HMRC are usually the same. With these deadlines in mind, here’s everything you need to do to get yourself prepared for your first MTD VAT submission.
Familiarise yourself with MTD
Before you dive into the world of digital tax legislation, it's helpful to get to grips with the lingo and some of the key things you need to know about MTD. We have a range of useful guides and materials like our MTD whitepaper, which provides an overview of the initiative and how it will affect your business. We’ve also investigated the 8 common myths surrounding MTD to help you sort fact from fiction.
HMRC has described the first year following the 1st April 2019 launch as a “soft landing period”, which they explain is a period of time “for businesses to have in place digital links between all parts of their functional compatible software”. However, there may be some circumstances in which you could incur a penalty for failing to comply with the initiative during this time. Find out more in our MTD for VAT penalties guide.
Sign up for MTD-compatible accounting software
You need to use compatible cloud accounting software to store your digital records and submit your first MTD VAT submission. Migrating to cloud accounting software is also a chance for you to modernise your record keeping and take control of your finances. Find the software that’s right for you, sign up for MTD and then connect your software to HMRC and you’ll be ready to go. In FreeAgent, your MTD-compatible VAT returns are generated automatically and are populated from the data you enter throughout the quarter. When it's time to file to HMRC, you can do so directly from within the software.
Keep your digital records up to date
Once your accounting software is connected to HMRC’s MTD system, there are a few day-to-day things you need to take care of to ensure you meet the expectations of the new digital VAT initiative. For example, you’ll need to keep digital records of relevant sales and purchases in your chosen MTD-compatible software.
Whereas in the old VAT filing system you could calculate your VAT liabilities in any way you liked, in the new system your accounting software will do this for you.
By keeping your digital records up to date, you can also make sure that you have enough in the bank to cover any upcoming bills. FreeAgent’s unique Tax Timeline is a great tool for this, forecasting what you owe in advance so you know how much you’ll need in order to pay your VAT bill.
FreeAgent is on HMRC’s list of MTD-compatible accounting software providers. Find out more about how FreeAgent supports VAT filing.
Disclaimer: The content included in this blog post is based on our understanding of tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances, so should not be relied upon. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included in this blog post. If you don't have an accountant, take a look at our directory to find a FreeAgent Practice Partner based in your local area.