MTD for VAT: Your questions answered

Here’s the answers to some of the common questions we’ve received in relation to Making Tax Digital for VAT.

What is Making Tax Digital (MTD) for VAT

VAT Returns must now be digital in compliance with Making Tax Digital (MTD) for VAT.

Making Tax Digital (MTD) is the HMRC programme requiring businesses to hold their accounting records digitally, ie on computer (accounting software, or spreadsheet).

The first tax to which MTD is to be applied is VAT. It is intended that other taxes are to follow in the coming years.

That means that from now on all entities that submit VAT Returns have to submit digitally (ie by computer and API).

This means that you can no longer type your VAT Return figures into the HMRC portal. The manual VAT Return portal has been closed to all but a few exceptions and submission will only be possible via Making Tax Digital compliant software. That can be either:

  • accounting software, or
  • spreadsheet

If you keep your accounts on spreadsheet, you will need to submit your VAT Return via Bridging Software (API), such as The Tax Kit’s.

For more information on this please see our blog:

What is Making Tax Digital (MTD) for VAT

What changed to VAT on 1st November 2022?

The way you submit VAT returns has changed. From Tuesday 1st November you will no longer be able to submit VAT Returns as you have previously.

In future, all VAT registered businesses must submit their VAT Returns complying with MTD (Making Tax Digital) – ie digitally using Making Tax Digital compatible software.

The old portal will be turned off for everyone on 30th October, except those few who have been licenced by HMRC for exemption to MTD.

Are there any changes to VAT Reporting or payment dates?

MTD compatible software can be either accounting software or spreadsheet but they must be combined with VAT Bridging Software, such as The Tax Kit’s, which allow them to communicate with HMRC’s systems.

HMRC stress that the deadlines for sending VAT Returns and making payments of VAT have not changed with these new Making Tax Digital rules.

Does MTD for VAT apply to me?

Do I need to register for MTD if I’ve voluntarily registered for VAT (ie under the £85,000 annual turnover threshold)?

All VAT Registered entities must now submit VAT returns via MTD compatible software, unless you have exemption. However, you no longer have to register for MTD for VAT, this is now automatic with VAT registration.

You do however need an online VAT account with HMRC to authorise them to share your data with your chosen MTD complaint software https://thetaxkit.co.uk/index.html#how-does-it-work

MTD Compatible software includes spreadsheet when used with MTD compatible Bridging software.

Initially only VAT Registered entities over £85,000 annual turnover (ie above the VAT Registration Threshold) had to sign up for MTD. But this has now been extended to all VAT Registered entities regardless of turnover (unless they have been specifically exempted by HMRC). So, as from 1st November 2022, all VAT Returns must be submitted in accordance with MTD.

What do I need to do for MTD for VAT?

If you’re VAT Registered, you no longer have to Register for MTD for VAT as well.

This has recently changed, HMRC have announced that Registration for MTD for VAT is now automatic with VAT Registration (unless you apply for exemption from MTD).

So, now all you need to do to submit your VAT Return in compliance with MTD is:         

  • select an approved MTD compliant software (such as The Tax Kit VAT Bridging App)
  • authorise HMRC to release your information to that software
  • submit you VAT Return via that software 

If your accounts are on spreadsheet, no problem – Submit you VAT Return simply and cheaply using The Tax Kit VAT Bridging App

Please note that, whatever software you chose, to be able to submit VAT Returns under MTD, you still need to be registered with HMRC with an online account for VAT via the Government Gateway and have a Government Gateway Login (12 digit numerical code) and password.

You need an online VAT account with HMRC to authorise them to share your data with your chosen MTD complaint software (like The Tax Kit Bridging App): https://thetaxkit.co.uk/index.html#how-does-it-work

You may already have set up an online account with HMRC for Income Tax or Corporation Tax, but each tax needs to be activated individually, so if you haven’t set it up for VAT, you’ll need to do that.

The link to set-up or sign-in to your personal Government Gateway account can be found following this link:

https://www.gov.uk/log-in-register-hmrc-online-services

So, to submit your VAT Returns in accordance with MTD, now instead of 3 registrations required, you now only need 2 registrations. Ie:

  • VAT Registration
  • Online account for VAT through the Government Gateway

How do I register for Making Tax Digital for VAT?

Registration for MTD for VAT is no longer required. From November 2022 your VAT Registration will include registration for MTD for VAT.

See our blog for further details:

What is MTD compatible software?

MTD compatible software is software that can integrate with HMRCs systems via an API.

MTD compatible software can be either:

  • accounting software, or
  • spreadsheet

If you keep your accounts on spreadsheet, you will need to submit your VAT Return via Bridging Software, such as The Tax Kit’s.

All that is required is a little work to register for MTD for VAT with HMRC and register with our application and authorise it with HMRC – and you’re good to go.

Complying with Making Tax Digital for VAT is as simple as that.

What is a Bridging App or Bridging Software?

A VAT Bridging App is a piece of software that allows spreadsheets to comply with HMRC’s new Making Tax Digital regulations (MTD).

Bridging software for MTD is a digital link to HMRC. The software creates a 2-way digital link with HMRC where-bye you can submit your VAT Return online and also access certain information from HMRC’s record. 

To submit a VAT Return in compliance with MTD with The Tax Kit’s Bridging App, the process is simple. You simply:

  • Download The Tax Kit VAT bridging tool
  • Link the relevant cells in your accounts spreadsheet
  • check your return and submit

It’s as simple as that.

There is no need to waste your time and money on complicated, expensive and time consuming accounting software if you don’t want to. Use your valuable time for something else.

What is an API? 

An Application Programming Interface (API) is software that links 2 or more software programmes, allowing them to exchange data. You have many APIs on your phone.

As far as MTD is concerned a VAT Bridging App is the API that allows you to:

  1. send updates (VAT Returns) to HMRC
  2. retrieve information from HMRC

How do I submit my VAT Return under MTD?

Bridging software for MTD is a digital link to HMRC. That is the software creates a 2-way digital link with HMRC where-bye you can submit your VAT Return online and also access certain information from HMRC’s record. 

To submit a VAT Return in compliance with MTD with The Tax Kit’s Bridging App, the process is simple.

Just:

  • plug in The Tax Kit VAT Bridging tool into your accounts spreadsheet,
  • link the relevant cells in your accounts spreadsheet to the VAT bridging tool,
  • check your return and submit in compliance with MTD.

 It’s as simple as that.

Will I comply with MTD for VAT if I continue using my Spreadsheet?

Can I keep my spreadsheet under MTD for VAT?

Yes. Spreadsheet combined with a VAT Bridging App will be your cheapest and simplest method of complying with MTD, especially if that’s currently your system.

If you’re comfortable with your spreadsheet – keep it!

A VAT Bridging App allows spreadsheets to comply with HMRC’s new Making Tax Digital regulations (MTD).

There is no need to waste your time on complicated, expensive and time consuming accounting software if you don’t want to.

Use your valuable time for something else, I don’t know – like growing your business instead.

Accounting software is very good if you need it. If you’re a larger company with a lot of transactions, employ a lot of people, then you need an accounting system to properly support your business. However, they are complicated and time consuming to learn and operate properly – and you’re not an accountant or bookkeeper. Also with accounting software you’re paying extra for additional facilities and therefore complications that you don’t need.

If you’re happy with what you have, why change?

It’s what you’re happy with that counts. If you run your business finances on a spreadsheet and that works for you, then fine – keep going with that.

You don’t have to change from a spreadsheet to accounting software to comply with MTD.

Do I need to buy accounting software to comply with Making Tax Digital for VAT.

No (see above answer relating to spreadsheets).

What are the Digital Requirements for Making Tax Digital for VAT?

Under MTD you must

  • keep digital business records and:
  • submit you VAT Returns to HMRC using MTD-compatible software

So, what does that mean?

Digital Business Records:

All the accounting entries must now be on computer – you can no longer write them into a book manually.

In addition, anything else (eg calculations etc) must also be managed digitally (ie on computer).

The summary information must not be physically re-typed into another software package

If you were previously using a spreadsheet or accounting software for your accounts, then it’s likely that you’re already keeping your records digitally as required under MTD – ie you’re keeping them on computer.

You must keep copies of your invoices or receipts, but these can be either paper originals or electronic copies – that’s up to you.

You must keep your records, including the invoices and receipts, for at least 6 years (unless you are operating under special requirements that requires longer).

Submission of VAT Returns digitally:

The submission of your VAT Return to HMRC must also be actioned digitally via MTD compatible software.

MTD compatible software can be either:

  • accounting software, or
  • spreadsheet

If you keep your accounts on spreadsheet, you will need to submit your VAT Return via Bridging Software, such as The Tax Kit’s.

All that is required is a little work to register with HMRC for MTD, register with our application and authorise it with HMRC – and you’re good to go.

Complying with Making Tax Digital for VAT is as simple as that.

Is The Tax Kit VAT Bridging App compatible with different types of spreadsheet?

Yes. Our application supports all modern versions of Microsoft Excel, from and including MS Excel 97.

We also support other spreadsheet applications, such as: Google Sheets, Apple Numbers, Libre Office, Open Office, etc.

Please see our Spreadsheet Software Compatibility FAQs section for more detail.

Do I need to make digital copies of my invoices and receipts?

No.

You must keep copies of your invoices or receipts, but these can be either paper originals or electronic copies – that’s up to you.

Businesses can continue to keep documents in paper form if they prefer.

The change under MTD is that all the accounting entries must now be on computer (spreadsheet or accounting software) – ie you can no longer write them into a book manually.

How long must I keep records?

You must keep your records, including the invoices and receipts for at least 6 years (unless you are operating under special requirements that requires longer – eg VAT One Stop Shop (OSS) or VAT Mini One Stop Shop (MOSS)).

Does HMRC want all my accounting data?

No. As far as VAT is concerned, under MTD only the same 8 boxes in the VAT Return are transmitted to HMRC. HMRC will not have access to the underlying transactions or any additional data due to MTD.

As far as the future implementation of MTD onto Income Tax, again we are advised that only the summary data will be transmitted to HMRC – the same as currently submitted in your Tax Return. HMRC will not have access to the underlying transactions or any additional data due to MTD. The major change for MTD for Income Tax will be that you will be required to report quarterly within a month of the end of that quarter, rather than just annually. Your Annual Income Tax Return will have facility to make adjustments, and you will also be able to make adjustments during the year.

I can’t submit my VAT Return (or access my information)

Check the permissions in your software. You need to authorise HMRC to release your data to your chosen software supplier.

To check and setup HMRC authorisation in The Tax Kit App:

  • go to the “My Account” drop down
  • then “My Business”
  • look in the Column “Authorised by HMRC”

If it says “Yes” then you have authorised The Tax Kit with HMRC.

If it says “No”, or “AUTHORISE NOW”, then click on it and it will take you through to your HMRC account where you can approve The Tax Kit to access your information.

Please be aware that HMRC will require this authorisation to be repeated every 18 months, or you won’t be able to access your information or submit a VAT Return via the software.

If you are a multi-user organisation, please remember that this re-authorisation will need to be actioned via the same account login details and password made the initial authorisation on set-up. This could cause problems if that staff member has left and you can’t remember that person’s login details and password.

How do I file my EC Sales List?

EC Sales lists are not yet part of MTD, so continue submitting them as you have previously.

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