What is MTD?
MTD was implemented in April 2019 for almost all VAT-registered businesses with a taxable turnover of above £85,000. HMRC implemented Making Tax Digital to assist individuals and companies in filing their taxes correctly. MTD requires you to file your VAT returns using HMRC-approved accounting software or bridging software.
This implies that you can no longer file your VAT returns manually or through spreadsheets. And according to further government orders, after 1st April 2022, businesses must submit VAT returns online using software.
What is VAT Return?
VAT returns are the means via which VAT-registered businesses must provide HMRC with two important pieces of financial information:
The difference between VAT collected and paid is calculated by HMRC. This sum becomes your VAT bill or VAT refund. Even if you don't owe any VAT or have any VAT to recover, you must send these online forms to HMRC every three months using MTD-compliant accounting software.
You must also retain digital VAT records that show your total sales and expenses, VAT payable to HMRC, and VAT you are eligible to reclaim.
Automatically Calculate VAT Returns
The main purpose of Making Tax Digital(MTD) was to automate the calculation and submission process of VAT returns to HMRC.
In the past, individuals, and businesses in UK used to keep financial records in spreadsheets and apply difficult formulas to calculate VAT returns. And tax season was such a headache for them.
But, thanks to technology now there are many accounting software in UK like Moneypex that lets you manage your business finances all year round and submit VAT returns from same accounting to HMRC.
You just have to set VAT percentage in your accounting software. Whenever you make a purchase or sell something VAT is automatically calculated. And even VAT reports are automatically generated, you just have to cross-check and submit VAT returns to HMRC in a few clicks during the tax period.
How to Register for VAT Returns?
If your financial data is organized VAT returns are calculated in your MTD-compliant software like Moneypex, then you can register for VAT right away.
To register for VAT in UK, you need:
Two Ways to Submit VAT Returns
As businesses that exceed the defined VAT threshold must use MTD-compliant software like Moneypex to submit VAT. Because you can manage your business finances and pay your VAT returns through same accounting software, you don’t need separate software to file taxes and handle business.
If you use spreadsheets and don’t use MTD-compliant accounting software to manage your business finances regularly, then you do need bridging software like Moneypex to connect to HMRC’s MTD system.
Getting VAT Refund from HMRC
If you paid more VAT than you received, HMRC will reimburse you. VAT refunds should be issued within 10 days of submitting your return. Make sure that HMRC has your up-to-date bank account details to avoid delays in your returns.
Fine on Late VAT Submission
Most businesses must submit VAT returns to HMRC one month and seven days after their accounting period ends. It is considered a default if the VAT return or complete payment is not received by the deadline. This can result in a 12-month surcharge timeframe. If you fail to meet another deadline during this period, the surcharge term is prolonged by a year, and you may be fined a percentage of the unpaid VAT.
But, if you pay your due VAT in full, even if you filed late, no surcharge will be applied.
Rejected VAT return
During the submission process, you will receive a message alerting you of the subsequent steps. But, if you receive an error message during the submission of your VAT return, you may have to reconnect your accounting software or Moneypex’s account with HMRC.
Stress Free VAT Filing with Moneypex
Before the start of your next VAT period, it might be smart to abandon spreadsheets and automate the VAT filing process with accounting software.
The less time you spend fretting over and managing your accounts, the more time you have to devote to your business. So make tax season quick, simple, and stress-free with Moneypex accounting software.
It automates your important VAT administrative tasks. It relieves the stress related to tax season. Just click on the correct gear at the right times.
Once you’re up and running, you will find it much simpler and quicker to compute and file tax returns with this online MTD soft
30 March, 2023
Accounting software compatible with Making Tax Digital for VAT. Easy to use and HMRC recognized accounting software in UK. Bridging software for VAT returns. HMRCRead More >>
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