HM Revenue and Customs is reminding businesses that from Tuesday 1 November, they will no longer be able to use their existing VAT online account to submit VAT returns.
In less than one month, businesses who file their VAT returns on a quarterly and monthly basis will no longer be able to submit them using their existing VAT online account.
By law, all VAT-registered businesses must now sign up to Making Tax Digital (MTD) and use compatible software to keep their VAT records and file their returns. Unless they are exempt, anyone that does not comply could face a penalty.
HMRC says the aim of MTD is "to help businesses get their tax right first time by reducing errors, making it easier for them to manage their tax affairs by going digital, and consequently helping them to grow." More than 1.8 million businesses are already using the service.
If businesses do not file their VAT returns through MTD-compatible software, they may have to pay a penalty. Even if a business currently keeps digital records, they must check that their software is MTD-compatible and sign up for MTD before filing their next return.
If a business hasn't already signed up to MTD or started using compatible software, HMRC says they must follow these steps:
- Choose MTD-compatible software - a list of MTD-compatible software can be found on the government website;
- Check the permissions in the software. Go to GOV.UK and search for "manage permissions for tax software";
- Keep digital records for current and future VAT returns;
- Sign up for MTD and file future VAT returns using MTD-compatible software.
If a business is already exempt from filing VAT returns online or if their business is subject to an insolvency procedure, they will automatically be exempt. Businesses can check to see if they can apply for an exemption from MTD on GOV.UK.
If a business is new and is not yet registered for VAT, they will automatically be signed up for MTD while registering for VAT through HMRC's new VAT Registration Service. Registering via this online service helps new businesses to be fully compliant with MTD from day one, although they will still need to get the right software to submit their VAT returns.
Businesses should ensure that they sign up to MTD at least five days after their last non-MTD VAT return deadline date, and no less than seven days before their first MTD VAT return deadline date to avoid paying for their VAT twice.
Written by Rachel Miller.