Making Tax Digital or Making Tax Difficult? Read this before you enrol..

If your business is VAT registered, you’ll know by now about enrolling in Making Tax Digital.

In brief, if your taxable turnover is over £85,000, you are required to use software to keep digital VAT records from your first VAT return period on or after 1 April 2019. That’s about now!

There are a few exceptions.

For example, if you’re a trader based overseas, you have to make payments on account or you use the annual accounting scheme, then you need to switch to digital for your first VAT return period on or after 1 October 2019. You can find out more about who can defer to this date here.

Unfortunately, some businesses have run into trouble because their agents (normally accountants who don’t understand the system) have signed them up for Making Tax Digital (MTD) before they have got compliant software up and running.

If this happens to you, you could find yourself unable to submit your VAT returns. And when that situation arises, you can end up paying the taxman hefty penalties!

So, why does this occur?

The problem happens because, from the date you are signed up for MTD, you must use compliant software to submit your VAT return. From that point, you also need to do this for unfiled periods that started before 1 April 2019.

Let’s take an example. Your accountant makes the mistake of signing you up for MTD in late January 2019, ready for the post April switch over. Your next VAT return is due on 7 February. You go to the Government Gateway Portal on that date to submit your return and discover it won’t let you – because you’re registered for MTD, you must submit it using compatible software.

Your software isn’t due to be installed until March. If you wait until then to submit your return, you’ll be fined. What do you do?

Unfortunately, the best you can do is damage limitation – HMRC is offering no ‘soft landing’ for failing to submit your returns via software.If you can’t submit your VAT return, pay it anyway via bank transfer. Take screen shots of the Government Gateway page that refuses to let you file your return. And above all, get in touch with HMRC as soon as possible to explain your problem. If you take all possible steps to submit in time, then you may have a good case to appeal against a penalty.

If, for some reason, you are not yet enrolled for MTD, then make sure your last VAT return is filed. Then make sure you have compatible and compliant software. And only then enrol.

It sounds simple, but if you don’t get this right you could run into a whole lot of unneccesary trouble!

(If you have any questions or queries, our THP accountants are of course always happy to help you out, ChelmsfordCheamWansteadSaffron Waldenand London City).

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