A major date in the MTD calendar is fast approaching: August 7th is the first compulsory deadline for submitting quarterly VAT Returns since the roll-out of HMRC's Making Tax Digital initiative.
Although Making Tax Digital came into effect on April 1st, until now, you might not have noticed any changes in the way you report your taxes, and you might not have made any steps towards preparing your business for online VAT Returns. But with the first major MTD deadline fast approaching, all of this is about to change.
In this blog post, we look at what August 7th means for businesses using HMRC’s Making Tax Digital scheme and what you should do to make sure you don’t miss this deadline.
What is Making Tax Digital?
By now, you probably know all about Making Tax Digital and the implications it might have for your business. But in case you’re still wondering what Making Tax Digital is, in short, MTD is HMRC’s new initiative for improving the way businesses report and pay tax. At the moment, Making Tax Digital only applies to VAT, but there are also plans to introduce MTD for a number of other taxes – although this won’t happen until at least April 2020.
Under MTD for VAT, businesses are required to keep digital records of their VAT transactions and use approved online software for submitting their VAT Returns.
Currently, Making Tax Digital is only compulsory for businesses with a VAT taxable turnover of £85,000 or more, but other VAT-registered businesses can opt-in voluntarily.
What’s important about August 7th?
August 7th 2019 is an important date in the MTD calendar as it’s the first deadline for quarterly VAT Returns since Making Tax Digital became mandatory for certain businesses.
Although Making Tax Digital came into effect on April 1st, June marks the end of the first financial quarter that needs to be reported according to the rules of the MTD initiative. This means that companies required to comply with Making Tax Digital will need to submit their VAT Return for April-June using approved MTD-compatible software.
Does the first MTD deadline apply to me?
If you submit quarterly VAT Returns and are registered for Making Tax Digital, you’ll need to be ready to submit a digital VAT Return before August 7th.
However, the August 7th deadline for digitally submitting VAT Returns only applies to businesses that are required to register for Making Tax Digital or have opted-in voluntarily. If you're registered for VAT but don't have to register for MTD (either because you're eligible for deferred registration or have a taxable turnover under the £85,000 VAT threshold), you still need to report your VAT by August 7th, but the way you do this won't have changed since your last VAT Return.
Furthermore, August 7th is only a major new deadline for businesses that report their VAT four times a year. Businesses that report their VAT monthly will have already started reporting VAT under the new MTD system back in June, while businesses that use the annual VAT accounting scheme aren't yet required to comply with MTD regulations.
If you're not registered for VAT in the UK, you don't need to worry about Making Tax Digital or the August 7th deadline as you have no VAT to report, pay, or claim back.
What do I need to do before August 7th?
HMRC has introduced a system of penalties under Making Tax Digital, so if you don’t report or pay your VAT on time, you might face additional fees. In order to avoid any penalties, here’s what you need to do before the August 7th deadline:
1. Register for Making Tax Digital
In order to use MTD-compliant software for submitting your VAT Returns, you first need to sign up for Making Tax Digital for VAT. This is complusary for most businesses with a turnover of £85,000 or more, and optional for VAT-registered businesses with a turnover below the VAT threshold.
You can either register yourself or ask an agent to do it on your behalf, but however you do it, you need to be signed up at least 72 hours before your VAT Return is due on August 7th – or by July 26th if you pay by direct debit.
2. Choose Making Tax Digital software
Because the MTD initiative requires businesses to submit their VAT Returns using specialist software, you need to find and sign up for Making Tax Digital software.
As Debitoor is approved by HMRC for online VAT Returns, Debitoor users can easily report their VAT directly from their account. No need for extra software – simply follow the steps in our tutorial to connect your Debitoor account with your Government Gateway ID and automatically generate VAT reports based on the information in your account.
3. Submit your VAT Return using MTD-compatible software
Once you’ve registered with HMRC and have signed up for Making Tax Digital software, the final step is actually submitting your VAT Return. The latest you can do this is August 7th, but it’s recommended that you don’t actually wait until the very last moment.
Debitoor users that are signed up for Making Tax Digital can submit their automatically-generated VAT reports directly to HMRC in just a few clicks. Find out more about Debitoor and Making Tax Digital, or try Debitoor free for 7 days.