Final countdown Making Tax Digital becomes only option

HM Revenue & Customs (HMRC – the UK tax authority), has confirmed that with effect November 1, 2022, UK VAT registered businesses will no longer be able to use their existing legacy VAT online account to file their quarterly or monthly VAT returns. This means that any business that hasn’t already signed up for Making Tax Digital (MTD) and started using MTD compatible software, won’t be able to file their UK VAT returns from this date and will therefore be at risk of missing submission deadlines, opening themselves up to penalties.

MTD applies to all business registered for UK VAT

As a reminder, with effect on April 1, 2022, MTD was extended to all UK VAT registered businesses – regardless of their size, turnover, location (both UK and foreign businesses), or whether they voluntarily registered for VAT. The initial ‘soft-landing’ period to allow businesses to get their digital links into place has now ended, and HMRC turning off the ability to file the UK VAT return through the legacy web-based VAT online account is the latest major milestone. Put simply, there is no longer an alternative way of filing the UK VAT return outside of MTD.  The only exception is that businesses that file annual UK VAT returns will technically still be able to use their VAT online account until May 15, 2023.

Penalties for non-compliance

HMRC recently published new guidance on the penalties that can be levied on taxpayers for not meeting the MTD requirements. The guidance clarifies how the taxpayer’s use of their MTD compliant software may influence the level of penalties that may be applied in the case of VAT errors. The authority’s announcement that the legacy VAT online account will be closed means that a VAT return can no longer be physically submitted if a business isn’t MTD compliant.

Options for business to file UK VAT returns under MTD

In order for businesses to continue to file UK VAT returns, they must sign up for MTD via HMRC’s website as soon as possible, no later than 31 October 2022. There are two main options available for businesses to file their UK VAT returns:

  1. Use MTD compliant software to file the VAT return
  2. Outsource the preparation and filing of the VAT return to an agent who will use MTD compliant software.

If you haven’t already got a MTD solution Avalara can help with our range of VAT solutions, from managed MTD compliant VAT compliance to our MTD Cloud solution. Speak to one of our experts today

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