New VAT changes: are you ready to move into a paperless world?  

As part of their scheme to increase VAT registration efficiency, HM Revenue & Customs (HMRC) is attempting to make the process entirely digital. 

This fits in with the Government’s overall policy of Making Tax Digital (MTD) and the specific policy of MTD for VAT.  

Currently, over 95 per cent of businesses use HMRC’s online VAT Registration Service (VRS) for VAT applications but HMRC aims to increase this percentage in the next few years to almost 100 per cent. 

What is MTD for VAT? 

MTD for VAT is a UK Government initiative aimed at modernising the tax system, making it easier for businesses to keep track of their tax affairs and submit VAT returns online.  

Businesses with a taxable turnover above the VAT threshold (£85,000) are required to keep digital records and submit VAT returns using MTD-compatible software.  

The move to MTD for VAT aims to reduce errors, improve efficiency, and streamline the tax reporting process for businesses but it can be a complicated process to get used to so speaking to your accountant is always advised. 

Who can submit paper VAT returns? 

Going forward, a business can file a paper form when they have a ‘reasonable excuse’ (as outlined by the Government) or they are filing in Welsh.  

Certain businesses and taxpayers exempt from online applications will still be able to apply via post using the paper VAT1 form.  

To obtain this form, they will need to contact the VAT helpline. HMRC will then inquire about the reason for opting for postal application, but businesses won’t need to secure an exemption beforehand. 

How to manage the transition to paperless taxation 

Managing your business’s transition and keeping compliant with MTD for VAT requires a few key considerations. 

• Selecting MTD-compatible software: Consult with your accountant or tax advisor to choose software that is compatible with MTD requirements. 

• Transitioning to digital records: Move away from paper-based record-keeping to a digital format. 
• Training staff: Ensure that employees responsible for financial record-keeping and tax filing are trained to use the new MTD-compatible software. 
• Regularly update your records: Keep your digital records up to date, as you’ll need to submit VAT returns online at the end of each tax period. 
• Filing VAT returns online: Use the MTD-compatible software to submit your VAT returns online, as paper submissions will no longer be accepted for businesses above the VAT threshold. 
• Monitor for updates: Stay informed about any changes to MTD for VAT regulations to ensure ongoing compliance and convey these to staff. 

• Avoid penalties: Failure to comply can result in penalties, so it’s crucial to adhere to all MTD for VAT requirements. 

To avoid penalties and remain compliant with the constantly changing regulatory landscape it is best to consult with an experienced accountant. 

A qualified financial expert can guide you in the right direction when it comes to MTD for VAT and ensure that your business files tax returns on time, accurately and efficiently.  

To remove the stress from your shoulders, contact one of our experts today and ask them about MTD for VAT.