What is Tax Digital (MTD)?
MTD is the term used to describe how you must submit your
VAT returns using an application that is approved by HMRC to file tax returns
for tax purposes, like Xero. This means that you can no longer be able to
submit VAT returns by hand. The application became obligatory for VAT periods
that begin on or after 1st April 2022. Once the system is operational, many
business owners find it more efficient and quicker to calculate and file vat returns online using the MTD software.
How can I sign-up for Making Tax Digital?
To join to sign up, you must possess :
Your business email address
A Government Gateway user ID and password. If you don't have
a Government Gateway account with an ID or password for a user it is possible
to create one using the service.
The VAT number you registered with, as well as your most
recent return for VAT
There may be additional requirements to sign up. Follow the
link for more information.
When should you sign-up?
If you already pay VAT
via direct debit, ensure that you register before the day when your tax return
is due or else you may have to be charged twice. To avoid this you should not
register with a price less than
Seven days in advance of the due date of your return
Five days after your return date is the due date.
Methods for submitting VAT
Accounting software
Beginning in April 2022, all VAT-registered companies will be required to utilise an MTD program regardless of their revenue. Find out more about how to make Tax Digital.
Software for Spreadsheets, MTD Bridging and spreadsheets
If you're using Excel spreadsheets for calculating VAT, you can connect with the HMRC MTD system using Xero. There is a
way to utilise Xero to act as a bridge program that lets you upload VAT figures
and then transmit regular VAT returns to MTD in the direction of HMRC.
VAT due dates
The due dates for your tax return are based on the date that
you registered for VAT, as well as the accounting software you are using. A
majority of companies must file tax returns every three months. The specific
dates through HMRC and then look it up in your VAT account online.
Tax Payment to HMRC
If you're facing an unpaid VAT charge usually, you'll be
able to pay it in one calendar month and have the option of seven days to pay. You
may pay the VAT bill through the Internet banking system, debit cards and
credit cards. The most efficient method is to set up direct debit. This allows
HMRC to deduct VAT that you owe on your bank account when the due date arrives. Please find out more about how to pay online for VAT by reading our guide.
If you miss your deadline, you may face penalties.
Receiving VAT refund
If you've made more taxes than you earned, HMRC will owe you
a sum of cash. They'll pay within 10 working days following the date you filed
the tax returns. Make sure they've got your account information.
Disclaimer
This guide is for the public for information purposes only.
It is suggested to consult your professional advisors for specific advice
regarding your business or before taking any actions regarding any of the
advice provided.
