Since 1 April 2022, all VAT-registered businesses have been required to comply with Making Tax Digital (MTD) requirements. However, up until now it has remained possible for businesses to file VAT returns through their VAT online account.
This week in Muras Matters we are reminding businesses that as from 1 November 2022 they will no longer be able to use their existing VAT online account to submit VAT returns and instead must file returns through MTD-compatible software. There has been a slight concession for businesses with turnover under the VAT threshold to be able to continue to use their online account but this is only for a limited period.
All VAT-registered business have been required to comply with MTD requirements since 1 April 2022 which includes using compatible software to maintain records and file VAT returns. Despite this requirement it has remained possible for businesses to file VAT returns through their online VAT account.
However, HM Revenue & Customs (HMRC) will close the VAT online account for filing returns to most businesses from 1 November 2022. Instead businesses will need to submit their monthly or quarterly VAT returns using MTD-compatible software. Businesses that do not file their VAT returns through MTD-compatible software from 1 November 2022 may have to pay a penalty.
Businesses using direct debit payments for their VAT liability should be aware that payments will not be taken on time if a return is not filed on time. As such they may then need to pay by alternative means in order to avoid incurring a default surcharge.
Business already exempt from MTD will still be able to submit VAT returns through their VAT online account. In addition those businesses currently exempt from filing VAT returns online and businesses subject to insolvency procedures will automatically be exempt from the changes. A taxpayer can check if they can apply for an exemption from MTD if it is not reasonable or practical for them to use computers, software or the internet. HMRC will consider each application on a case-by-case basis.
HMRC has also recently confirmed that businesses with a taxable turnover of less than £85,000 per annum will be able to continue to use their VAT online account but only in order to be able to file their VAT return due on 7 November 2022. Thereafter, these business will only be able to use MTD-compatible software for all future VAT returns. Such business have only been subject to MTD since April 2022 and this concession effectively gives them between one and three additional months to register for MTD.
If you have any questions or would like any assistance regarding submitting VAT returns using MTD-software, please speak to our Tax Director, Jenny Marks.
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