13 March 2019
Sign Up Tips and Advice for Making Tax Digital this April
Making Tax Digital (MTD) is starting on 1 April 2019. While most affected businesses are aware of the introduction of MTD, Accountancy Daily has recently reported that only 45% of VAT mandated businesses plan to sign up before this fast-approaching deadline.
With this in mind, we have outlined our tips to help make the Digital Tax sign up process as efficient as possible – providing a step-by-step guide so your business is ready for the new initiative.
Which businesses are affected by the 1 April 2019 deadline?
These new regulations, designed to modernise and simplify HMRC’s tax system, will initially be mandatory for VAT registered businesses with a taxable turnover above the VAT registration threshold of £85,000. If this is your business, you will be required to keep digital VAT business records and send returns using MTD compatible software.
If your turnover is less than £85,000, you do not have to follow the rules for MTD if you do not want to. However, it is likely that most businesses will need to comply by 2020.
There are other exemptions to this deadline:
The Financial Secretary, Mel Stride, recently made some clarifications on MTD exemptions in Parliament: “I must make clear that during the first year of mandation, penalties will not be issued for late filing but only for late payment. There will, of course, be a process to claim an exemption from MTD on the basis of digital exclusion owing to factors such as disability or problems with access to broadband, or on religious grounds. Any business that is already exempt from online filing for VAT will remain so under MTD without having to reapply.”
If you are unsure of whether the 1 April 2019 deadline affects your business, do make sure you contact your accountant.
When will you need to sign up for Making Tax Digital?
When you need to sign up for MTD depends on two things:
- What your quarter end date is
- How you pay your VAT
What is your quarter end date?
MTD for VAT starts at the beginning of the first VAT quarter starting after 31 March 2019. So, if your VAT quarter ends on 31 March 2019, you need to start accounting for VAT using MTD from 1 April 2019.
If your VAT quarter ends on 30 April 2019, you do not need to start until 1 May 2019 and if your quarter end is 31 May 2019 then you do not need to start until 1 June 2019.
How do you pay your VAT?
The other important aspect to consider is how you pay your VAT. If you pay VAT by direct debit, there is an additional constraint on when you can sign up for MTD for VAT. The earliest that you can sign up is 5 days after the payment has been made for the last quarter under the old system.
For example, if your quarter end is 31 March 2019, the payment for VAT will be made on 10 May 2019. You will have to wait 5 working days (17 May 2019) before you can sign up for MTD for VAT. The latest day that you can sign up for MTD for VAT is 15 working days before the submission date of 7 August (17 July 2019).
How do you sign up for MTD for VAT?
Signing up for MTD for VAT is a four-step process if you are an agent. HMRC have detailed their step-by-step process for agents here. If you are a business submitting your own VAT return, then it is a two-step process. If you are a business, you can do this by using your existing government gateway ID if you have one, or you can set up a new one.
For businesses, the steps are as follows:
- Turn on the MTD part of the MTD compatible software.
- Then sign up for MTD to submit your VAT return.
In the second step, you will need to answer the following:
- Do you have accounting software for managing your VAT records?
- Is your software ready to submit your MTD for VAT Returns directly to HMRC?
After this, you will need to:
- Sign into your HMRC account
- Make sure you have your VAT number to hand and the date you became VAT registered
- Provide the post code of your principal place of business
- Specify the type of business you are registered as
- Supply your Company Number if you are a Limited Company (depending on the response to the previous question)
- Give your Unique Taxpayer Reference
- Agree to receive emails instead of letters form HMRC about VAT
When an agent sets up a client for MTD for VAT, the agent has to enter a client email address as the client will have to confirm that the agent is doing MTD on behalf of the client.
HMRC will send an email to the client and they have to click on a link in the email to confirm. Therefore, communication between agent and client is important if your agent is going to be doing the MTD for VAT returns.
TBL Accountants can help
We have already helped many businesses prepare for Digital Tax. Our team of experts have the skills to ensure your accounts are fully compliant and we are committed to helping local businesses migrate to MTD as easily as possible.
Be sure to contact us at your earliest convenience and we’ll provide the support you need to get started with Making Tax Digital.