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The way you file VAT returns is changing

A major change from 1 November 2022

20 Oct 2022

There’s a major change to the way that businesses file their VAT returns and maintain VAT records coming into effect from 1 November. Businesses will be required by law to file VAT returns using MTD-compatible software and those who fail to comply could face a penalty.

From 1 November 2022 businesses will no longer be able to use their existing VAT online account to file monthly or quarterly VAT returns.

All VAT-registered businesses must now sign up to Making Tax Digital (MTD) and use MTD-compatible software to keep their VAT records and file their VAT returns. This is a legal requirement.

Businesses who do not sign up for MTD and file their VAT returns through MTD-compatible software from 1 November may be fined. The best way for businesses to avoid penalties is to start using MTD now.

What businesses need to do now, or they could face a penalty

Businesses that haven’t signed up to MTD and started using compatible software already, must follow these steps now:

  • Step 1. Choose MTD-compatible software that’s right for them find a list of software, including free options, on GOV.UK.
  • Step 2. Check the permissions in their software – once they’ve allowed it to work with MTD, they can file their return easily. Go to GOV.UK and search ‘manage permissions for tax software’ for information on how your clients should do this.
  • Step 3. Keep digital records for their current and future VAT returns –find out what records they need to keep on GOV.UK.
  • Step 4. Sign up for MTD and file their future VAT returns using your MTD-compatible software – to find out how to do this, go to GOV.UK and search ‘record VAT’.

If you are already signed up to MTD, no further action is required.

Businesses due to file by 7 November 2022

If a business’s turnover is under the VAT threshold of £85,000 and they haven’t signed up to MTD in time to file their next return by 7 November 2022, they can still use their existing VAT online account for that return only.

However, they must complete the steps above in order to file any returns due after 1 December 2022 if they file monthly or quarterly VAT returns, or they could face a penalty.

HMRC will contact these businesses directly to let them know.

Businesses that file annual VAT returns will still be able to use their VAT online account until 15 May 2023.

How to apply for an exemption from using MTD-compatible software

A business that is already exempt from filing VAT returns online or if they or their business are subject to an insolvency procedure, they’re automatically exempt from MTD.

Businesses can check if they can apply for an exemption on GOV.UK. HMRC will consider each application on a case-by-case basis.

Scam alert

If someone contacts you saying they’re from HMRC and wants you to transfer money urgently or give personal information, never let yourself be rushed. Take your time and check HMRC’s advice about scams on GOV.UK.

If you require any more information, please do contact us.

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