Are you a VAT registered business not yet signed up to Making Tax Digital (MTD) – Your deadline is 31st October 2022

Are you a VAT registered business not yet signed up to Making Tax Digital (MTD) – Your deadline is 31st October 2022

Are you a VAT registered business not yet signed up to Making Tax Digital (MTD) – Your deadline is 31st October 2022

 

There is no getting away from it, Marking Tax Digital (MTD) for VAT is fast approaching. All VAT registered businesses, regardless of whether they are under or over the £85,000 threshold, will no longer be able to use their existing VAT online account to file their quarterly or monthly returns after 31𝙨𝙩 𝙊𝙘𝙩𝙤𝙗𝙚𝙧 2022.

 For businesses that file yearly returns, they will no longer be able to use their existing VAT online account after 15𝙩𝙝 𝙈𝙖𝙮 2023.

 By law, if they have not already done so, all VAT-registered business must now sign up to Making Tax Digital (MTD) and use MTD-compatible software to keep their VAT records and file their VAT returns.

 

Using MTD software to keep digital records and file VAT returns

is not enough, you MUST sign up to MTD for VAT before

you file your next return.

  

Not yet signed up for MTD, check out the steps below to become MTD compliant and avoid possible penalties that may be levied 

  • Chose MTD-compatible software that is right for you and your business. Here at Cactus Bookkeeping we use FreeAgent, QuickBooks, Sage and Xero, however HMRC’s website has a huge list of MTD compliant software which can be found at https://bit.ly/MTDCompatibleSoftware

 It’s important to find software that is right for you and your business and if you are in any doubt about which one is right for you, speak to a bookkeeper or accountant who can offer an unbiased view based on you and your business requirements. 

  • Sign up for MTD at https://bit.ly/SignUpForMTD Remember, just using MTD compliant software is not enough, you must sign up for MTD. 

To sign up for MTD you will need the following:

  • your business email address
  • a Government Gateway ID, if you do not have one, you can create this when you use the service
  • your VAT registration number and latest VAT return

You will also need:

  • your National Insurance number if you are a sole trader
  • your company registration number and Unique Taxpayer Reference if you are a limited company or registered society
  • your Unique Taxpayer Reference and the postcode where you are registered for Self-Assessment if you are a general partnership
  • your Unique Taxpayer Reference, the postcode where you are registered for Self-Assessment and your company’s registration number if you are a limited partnership 
  • Keep digital records for your current and future VAT returns. Nothing has changed in this regard, you need to keep paperwork relating to everything you buy and sell (including zero-rated, reduced and VAT exempt items). Also keeping bank statements, cash books, cheque stubs, paying-in slips and till rolls. 

You must keep some VAT records digitally, unless you are MTD exempt, and these can be found at https://bit.ly/DigitalRecordKeeping

  How to apply for an exemption from using software

 If you are already exempt from filing VAT returns online or if your business is subject to an insolvency procedure, you are automatically exempt.

 You can check if you can apply for an exemption at https://bit.ly/ExemptionfromMTD if it is not reasonable or practical for you to use computers, software of the internet. HMRC will consider each application on a case-by-case basis.

 

 If MTD for VAT is filling you with dread, please get in touch for a chat to see how we can help.

 

 

 

ABOUT SUE

Sue Haynes is the founder of Cactus Bookkeeping and helps business owners
with all aspects of Bookkeeping to save them time so they can concentrate on running their
business. Sue is licensed, regulated and supported by the Institute of Certified Bookkeepers (ICB)

When should you register for VAT?

When should you register for VAT?

When should you register for VAT?

You are required to register your business for VAT with HM Revenue and Customs (HMRC) if: 

  • your total VAT taxable turnover (your sales) over the last 12 months was over £85,000, the current threshold for 2022/23 tax year 
  • you expect your turnover to go over £85,000 in the next 30 days

 You have 30 days from the end of the month you go over the threshold to register for VAT.

 Your effective date of registration is the first day of the second month after you go over the threshold.

 From your effective date of registration, you must: 

  • Charge the right amount of VAT
  • Pay any VAT due to HMRC
  • Submit VAT Returns
  • Keep VAT records and a VAT account

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 Value Added Tax (VAT) is charged on the majority of goods and services provided by VAT-registered businesses in the UK. It also applies to certain goods and services imported into the UK from the EU and non-EU countries.

As a business owner it is your responsibility to keep track of your turnover (sales) over a consecutive 12-month period, not over the 12 months of your financial year. Remember, if you are getting close to the VAT threshold you must register within 30 days of reaching the current threshold of £85,000 (2022/23 tax year).

When making this calculation any sales which are zero rated need to be included in your calculation to identify if you have reached the threshold for VAT registration. The only rate of VAT you ignore are VAT exempt sales.

When you register for VAT, it is your responsibility as the business owner to apply the correct rate of VAT on the sales you make. For the majority of businesses, it will be 20% (the standard rate at 2022-23). However, for example, in the hospitality industry the rate of VAT to be charged varies depending on what is being sold and where it is to be eaten, (eat in or takeaway, hot and cold food). It is therefore vital for business owners in this industry to fully understand the VAT rates for the food and drink they sell.

HMRC have provided guidance on VAT rates for different goods and services, and this can be found using the following link: VAT rates on different goods and services – GOV.UK (www.gov.uk)

Many small businesses with a turnover below the VAT threshold volunteer to register for VAT as they deem it to be advantageous:

  • VAT can be reclaimed on goods and services purchased from other businesses.
  • If their customers are VAT registered, they will be able to reclaim the VAT, which may give them an advantage over a non-VAT registered business
  • Voluntary registration can be backdated by up to four years, which will allow VAT to be claimed back on equipment and set up costs if you still have those items and can provide the invoices/receipts.

Late Registration

If you register late, you must:

  • pay VAT on the sales you have made since the date you should have registered AND
  • you may need to pay a penalty depending on how much you and how late your registration is.

VAT is not a one size fits all and there are too many variables to cover in this blog.

The most important thing to do if you are not VAT registered, is keep track of your sales over the last 12 months and if you are creeping up on the VAT threshold, take advice from a qualified bookkeeper or accountant.

 

 

ABOUT SUE

Sue Haynes is the founder of Cactus Bookkeeping and helps business owners
with all aspects of Bookkeeping to save them time so they can concentrate on running their
business. Sue is licensed, regulated and supported by the Institute of Certified Bookkeepers (ICB)