MTD Has Changed VAT Return Filing – Act Now to Avoid Penalties

By Kate | November 24, 2022

On 1^st November, HMRC closed their old system for quarterly and monthly VAT return submission. Instead, businesses must now file these returns through Making Tax Digital (MTD) compatible software, unless they’re exempt.

We can file for you, or, if you haven’t yet chosen a compatible software package, we offer discounted software licences to clients, from key names such as QuickBooks, Sage, Xero, and FreeAgent.

Note that if you file annual VAT returns, you can still use your online VAT account – but you will be signed up to MTD automatically after 15^th May 2023.

Continue reading to find out more on MTD for VAT returns, or contact us today for advice.

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Choose MTD-Compatible Software for VAT Returns

Following the old VAT system closure in November, HMRC is automatically signing up all businesses to MTD (if they file quarterly or monthly returns).

If you haven’t already started using MTD-compatible software which allows you to keep digital records, you must follow these steps:

Choose an MTD-compatible software package which suits your business – we offer discounted licences to clients from top names, or there are free options available too
Make sure you’ve enabled permission for your software to work with MTD – we can do this for you, or you can find out how to manage permissions for tax software here
Keep digital records for current and future VAT returns – contact us to discover more on our bookkeeping services, or you can find out what records you must keep here
File all quarterly and monthly VAT returns through MTD-compatible software

If you’re already using MTD-compatible software for VAT returns, then no further action is required.

How to Apply for MTD Exemption

The following types of business are automatically exempt from MTD for VAT:

If they’re already exempt from online VAT return filing
If they’re subject to an insolvency procedure

You can apply for an exemption here, and HMRC will consider each application individually. This only needs to be done once, or we can apply for exemption on your behalf – once HMRC has reached a decision, they will also send you a copy of the decision letter.

What Penalties Could be Charged?

As things stand, if you miss a VAT return submission deadline, HMRC will record a ‘default’ on your account. You won’t be charged the first time, but if you default again within 12 months, you will have to pay a charge on top of the VAT that you owe.

However, from the New Year (1^st January 2023), HMRC are introducing a new points-based system for late VAT return submissions and payments:

If you don’t submit a VAT return on time, you may receive a late submission penalty point and a fine.
If you don’t pay your VAT on time, you may be charged a late payment penalty, depending on how late the payment is. You will also be charged interest.

Are You MTD-Ready for VAT Returns?

Do you have MTD-compatible software in place for your quarterly and monthly VAT returns? If you need help getting set up, our friendly team can assist you through the entire process – and can even offer you discounted software licences. Contact us through our online form, call 01743 562430, or email hello@mercianaccountants.co.uk today.