Change is on the way for VAT returns

Martyn Bramwell, from Dyke Yaxley Chartered Accountants, in Shrewsbury and Telford, said HM Revenue and Customs had announced they would be closing the online scheme and businesses needed to take urgent action.

“Since the start of April this year, all VAT-registered businesses have been required to comply with Making Tax Digital requirements. This means they have had to use compatible software to keep VAT records and file their VAT returns.

“But despite the new rules, some businesses have been able to file their VAT returns through their online account and in fact, figures show there are several hundred thousand businesses filing in this way.”

Martyn said this would not be allowed to continue from November 1 as the portal for filing on a monthly or quarterly basis would be closed.

“The change will mean that businesses must file their returns through Making Tax Digital-compatible software and if they fail to do so, they may face having to pay a penalty.”

Businesses who fail to pay their next VAT return on time because they have not signed up to the MTD VAT scheme could also face a surcharge.

“Direct debit payments will not be taken on time if the return is not filed on time, and so you may have to pay in a different way in order to avoid a penalty for VAT returns due before January 1, 2023,” said Martyn. “VAT periods beginning on or after January 1 will be subject to new late submission and late payment penalties.”

Some businesses though are already exempt from MTD and they will still be able to file VAT returns through their online account.

“Taxpayers who could be exempt would be anyone for whom it isn’t reasonable or practical for them to use computers, software or the Internet, and HMRC considers each application on a case-by-case basis. Businesses currently exempt from filing VAT returns online and businesses subject to insolvency procedures will also be automatically exempted from the MTD rule changes.”

Martyn said businesses must act now by choosing or building MTD-compatible software, keeping digital records for current and future VAT returns, and signing up for MTD to file future VAT returns in the new way.

“It is possible for businesses to appoint an agent to act on their behalf and to file MTD VAT returns although the business itself would still have to sign up to the MTD system. And if your business is not already registered for VAT, any new registrations will automatically be signed up to MTD from November 1 onwards.”