From that day, by law, 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.
If clients do not sign up for MTD and file their VAT returns through MTD-compatible software, they may have to pay a penalty.
The best way for businesses to avoid penalties is to start using MTD now.
If clients haven’t signed up to MTD and started using compatible software already, they must follow these steps now:
- Step 1. Choose MTD-compatible software that’s right for them — You can 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 — You can 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 clients are already signed up to MTD, no further action is required.
Information for businesses due to file by 7 November 2022
If a client’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.
Businesses that file annual VAT returns will still be able to use their VAT online account until 15 May 2023.
If a client 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.
Tax agents can check if they can apply for an exemption on GOV.UK. HMRC will consider each application on a case-by-case basis.
Tax agents are also reminded they should never ask for or use their client’s HMRC sign-in details to access their tax account.
If access to a client’s information is needed, it should be obtained using the correct authorisation from that client and using HMRC’s agent digital services.
If an agent cannot get a client’s information using agent digital services, then it is recommended asking the client to sign into their Personal Tax Account and provide the information or contact HMRC.
