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Voluntary VAT filers: How to register for Making Tax Digital before the deadline

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If your business is registered for VAT, you’ve probably heard all about Making Tax Digital (MTD), and MTD for VAT in particular.

Introduced in April 2019, it affected all VAT-registered businesses over the VAT threshold (currently £85,000).

In April 2022, MTD for VAT will apply to all VAT-registered businesses. This includes businesses that are voluntarily registered for VAT.

In other words, all VAT businesses both below and above the registration threshold will have to store their VAT accounting records digitally, and use compatible software for their VAT accounting.

MTD for VAT provides an opportunity to revolutionise your accounting.

By switching to software, or updating your current software to be compliant, you can both modernise and take advantage of the latest technologies. At the same time, your overall accounting admin workload is reduced.

In this article we look at how to register for MTD for VAT if you’re new to it all.

Here’s what we cover:

How to register for a VAT account and submit a VAT Return online

What you need to register for MTD for VAT if you’re voluntary registered

How to register for MTD for VAT if you’re voluntary registered

Can my accountant register for MTD for VAT for me?

How to ask to be digitally exempt from MTD for VAT

Can I deregister from voluntary VAT to avoid MTD for VAT?

Final thoughts on MTD for VAT

If you’re not already registered voluntarily for VAT then now might be the time. Registering means you can reclaim VAT on things you purchase for your business.

Many businesses register voluntarily because it makes their operation appear more professional – especially when selling to other businesses.

The goal of Making Tax Digital for VAT is to simplify VAT accounting. So if you’ve been put off previously by the administrative requirements of VAT accounting then it’s a great opportunity.

You can register for VAT online, or your accountant can do it for you. If doing it yourself, you’ll need to create a Government Gateway account for your business (if you don’t already have one).

Once you’ve registered for VAT, you’ll be sent your VAT number that you should then quote on your VAT invoices.

You should start accounting for VAT from the date that HMRC registers you.

Once you have your VAT number, you can also submit a VAT Return online when the time comes. To do this, you’ll need to sign up for a VAT online account.

This is done by logging into the Government Gateway account you created while signing up for VAT, and then selection the option headed VAT Submit Returns.

VAT Returns for voluntary registrants can be filed online.

Once you’ve completed an initial VAT Return (at least), you can then sign up for MTD for VAT.

To register for MTD for VAT, you’ll need gather together a few bits of information:

  • The email address you use for your business.
  • The Government Gateway ID you use for the business.
  • Your VAT registration number.
  • Your latest VAT Return.
  • Your National Insurance number if you’re a sole trader.
  • Your company registration number and Unique Taxpayer Reference (UTR) if registering a limited company.

You will need to have chosen the software you intend to use before signing up for MTD for VAT.

You can then register for MTD for VAT by clicking register for MTD at the Gov.uk website then answer the questions, which will involve providing the information mentioned earlier.

Note that there are limitations on when you can sign up, in order to avoid accidentally making a double payment for your current return.

You should not sign up less than seven days before your VAT Return is due, or less than five days after your VAT Return is due.

You should receive confirmation from HMRC within three days.

Note that the MTD for VAT features in your accounting software will need to be activated once you know your sign up details, as provided by HMRC.

In other words, activation won’t be automatic. Speak to your software vendor if you’re unsure of what’s required.

Yes! Just ask them to do so on your behalf.

But bear in mind that this doesn’t mean you can ignore MTD for VAT’s requirements.

You’ll still need to store your key VAT accounting records digitally, and you can still need to use software for your VAT accounting – even if your accountant then calculates your VAT bill and submits the VAT Return on your behalf.

Your accountant may ask that you link your accounting software with theirs.

It’s not possible to opt out of MTD for VAT.

All VAT businesses must follow its rules as of April 2022, including those that are voluntarily registered for VAT.

However, some businesses have genuine reasons why they’re unable to comply with Making Tax Digital.

These include the following:

  • Reasons of age, disability, remoteness of location or, in HMRC’s words, “any other reason” that means it’s not “reasonably practicable” for the business owner to use digital tools to keep business records or submit returns. For example, a business without an internet connection because it’s on an island that’s off the grid might be considered exempt.
  • Religious beliefs are incompatible with the requirements of MTD for VAT. This is typically that the individuals running the business are unable to use computers because of their beliefs.

To apply for exemption, you will need to contact HMRC’s VAT helpline to discuss the situation and arrange alternative measures. It’s important to note that if HMRC believes exemption isn’t appropriate, it may offer digital assistance to help your business get online support.

Any VAT-registered business can ask to cancel their VAT registration with HMRC if the taxable sales are expected to be less than the registration threshold (currently £85,000) in the coming year.

This is known as voluntary VAT registration cancellation. It can be done online, or you can you fill in and then post a VAT7 form to HMRC.

HMRC says it takes three weeks for the cancellation to be confirmed. This will include confirmation of the cancellation date, which you will already have set with HMRC. Typically, this is the date on which you make the request.

Up to that date, you should continue to observe VAT requirements.

You’ll need to submit a final VAT Return for the period up to the cancellation date. This must account for stock and assets you have at the cancellation date if you could reclaim VAT when you bought them, and if the total VAT due is over £1,000.

MTD for VAT for voluntary VAT businesses will be here before we know it –  so they need to start preparing.

Depending on the nature of your accounting processes, this might simply be a matter of registering online and activating the feature in your accounting software. Or it could involve switching to an entirely new accounting package if your existing one isn’t compatible with MTD for VAT.

Some businesses may find themselves having to move to accounting software from paper records.

No matter which camp you find yourself in, it’s vital to start addressing this issue today. Don’t put it off.

Speak to your accountant about the requirements, and examine processes in your business to see what will need to change.

Remember that this can also be a positive evolution in your accounting. Using good cloud accounting software will reduce your overall admin workload. You can automate tasks, and your data is one place where it can be accessed 24/7, by all kinds of devices – from your laptop, to your phone.

You don’t have to wait until the deadline to make the move, and can switch today to MTD for VAT. Having been introduced in 2019, it’s a well-established process and all the bugs have long since been removed.

A guide to Making Tax Digital for VAT

Need help to get your business ready for Making Tax Digital? Download this free guide to learn about MTD for VAT and get prepared now for changes that start from April 2022.

Download your free guide

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