Making Tax Digital for VAT Return

A noteworthy initiative by the UK government, referred to as Making Tax Digital (MTD), came into effect on 1 April 2019. MTD aims to ensure that businesses, registered for Value Added Tax (VAT), with taxable earnings more than the VAT threshold of £85,000 must file and send their Value Added Tax returns via software such as Nomisma Solution. This initiative is focused at keeping the Value Added Tax records digital. Her Majesty’s Revenue and Customs (HMRC) aims to enhance its digital operations and develop into a top digitally advanced tax authority. MTD lays emphases on making vital modifications in the tax filling structure and make operations more well-thought-out, easier and simpler for taxpayers. For businesses where returns are managed and filed internally, and not managed through a bookkeeper or accountant, it becomes imperative for a business to thoroughly understand the requirements and parameters of MTD. VAT registered organisations that can register for MTD are as follows -
  • A not-for-profit organisation
  • A trust
  • A sole trader
  • A partnership
  • Part of Value Added Tax group or division

When is the first Making Tax Digital for VAT Return due?

Below mentioned is the timeline for MTD Value added tax:
  • For a business with VAT period ending on 31 March, the first Making Tax MTD VAT quarter return was due on 1 April 2019
  • For a business with VAT period ending on 30 April, the initial Making Tax Digital VAT quarter return was due on 1 May 2019
  • For a business with VAT period ending on 31 May, the first Making Tax Digital VAT quarter return was due on 1 June 2019

When to sign up for MTD for VAT and file your first return?

A business cannot sign up for Making Tax Digital for VAT until the final non-MTD Value Added Tax return has been filed. HMRC provides the below mentioned guidelines as to when a business should sign up to Making Tax Digital for VAT:
  • If a business pays through direct debit, before signing up for Making Tax Digital for Value Added Tax, they must wait for five working days post the filing cut-off date of the final non-MTD return. Additionally, the business should permit a minimum of seven working days prior to the filing deadline to file the initial Making Tax Digital for VAT return
  • If a business pays through a non-direct debit technique, a business must agree to a 24 hour time span post the most recent non-MTD return prior to signing up, and 72 hours post signing up before filing the initial return under Making Tax Digital.

How to register for MTD for VAT?

Businesses in the United Kingdom are not automatically enrolled for Value Added Tax, hence, it is mandatory for a business to register for Making Tax Digital. The process to register begins with logging into the Government Gateway account and following the below mentioned steps:
  • Enter the Government Gateway ID and PIN
  • Enter the company’s Value Added Tax number (this can be found on the Value Added Tax registration document)
  • Enter the date of registering the business for Value Added Tax (same can be found on the registration document)
  • The postcode of the main place of business i.e. location where the main business operations are carried out
  • The month in which the latest VAT return was filed

Creating and submitting an MTD for VAT return

As stated earlier, Making Tax Digital VAT return must be submitted through an accounting software or cloud-based accounting software. If a business is using a desktop software, then it must be updated using a bridging tool – a cloud-based accounting software like Nomisma Solution is updated automatically

Creating and sending an MTD for VAT return using Nomisma Accounting Software

Created in 2013, Nomisma Solution is United Kingdom’s most widely held cloud-based accounting software. To activate Making Tax Digital within accounting, click settings and follow the necessary steps to activate Making Tax Digital section. Then follow the guidelines, which will comprise allowing access for accounting with HMRC

Keeping records digitally

Though Making Tax Digital focuses on the digital filing of Value Added Tax returns, however, the Value Added Tax legislation for Making Tax Digital also states that Value Added Tax records must be readable, complete and accurate in a digital format. Businesses in the United Kingdom should keep their records digitally. Also, businesses must submit VAT return by electronic means through a software acknowledged by HMRC. Read more about Making Tax Digital