Making Tax Digital for VAT – here’s what you need to do

The results of IPSE’s survey on MTD for VAT are in and it spells trouble. Trouble for business and trouble for HMRC. 27% of those that will be required to register for MTD from April have either never heard of it, or have heard of it but know nothing about it beyond that.

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This is a problem for the government, and quite frankly it’s an indictment on the lack of effort they’ve put into publicising what is a major change to the way people report and pay their VAT. It’s a problem for businesses too, who will soon find HMRC have a new stick to beat them with. Here’s what you need to do to avoid attracting the attention of the taxman.

Step one is working out if you are required to register for MTD. Broadly speaking, if your turnover is above the threshold - £85,000 – you will be, however, some businesses are exempt for the time being so it’s worth checking here to see if those exemptions apply to your business. If you have voluntarily registered for VAT, but if your turnover is below the threshold, you do not need to register for MTD, yet. In most cases you’ll need register in six months’ time.

Step two is getting the MTD compatible software. Unfortunately, this comes at a cost, but hopefully not a prohibitive one for most businesses. You may have noticed a few adverts at bus stops and train stations from some of the larger software providers about their ‘MTD ready’ products. A full (and to be honest, bewildering) list of the available software is here.

Step three is registering. You can do this here. You need to do this at least one week before your next VAT return is due (assuming it falls after 1st April). That the official advice on the I have been told by HMRC officials that you need to do it 15 working days before your next VAT return is due – so my advice is do it in plenty of time.

Finally, you’ll need to authorise your software. Your software provider should be able to help with this.

If you do all of that, you should be fine. But if you don’t do it, or you run into difficulties, I would strongly recommend that you pay your VAT, even if you do it via the old system. Strictly speaking, you shouldn’t be using the old system after April (unless your business is exempt) but somewhat bizarrely, you’ll still be able to access and pay via the old system. You can expect to get your wrist slapped for HMRC for doing it, but failure to pay VAT altogether will incur more serious trouble – as it always has.

IPSE’s tax helpline is on hand for any IPSE questions. Just call 02088979970

Meet the author

Andy Chamberlain

Director of Policy and External Affairs