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Making Tax Digital for VAT deadline looms for small businesses – are you ready?

The clock is ticking for some small business that are yet to choose a Making Tax Digital (MTD) compatible accounting software. 

The UK Government is urging VAT-registered small businesses to act now and choose a software solution before it becomes mandatory on April 1, 2022. 

Up until now, only VAT-registered businesses with a taxable turnover of more than £85,000 have been required to follow MTD – which involved keeping digital records and filing VAT returns using MTD-compatible software. 

From April 1, this will apply to all VAT-registered businesses, including those with a taxable turnover below £85,000.  

Cashflow Manager, one of the MTD-compatible software solutions promoted on the GOV.UK website portal, can help small businesses transition to MTD with ease.  

Businesses can save time and hassle by letting Cashflow Manager create VAT Returns from their digital records. 

Cashflow Manager can even check what VAT is owed, send the VAT Return directly to HMRC, and receive confirmation back from HMRC.  

Plus, by using Cashflow Manager, businesses can submit their data through their accounting software monthly or quarterly instead of annually, resulting in far less work, less stress and fewer surprises at the end of your financial year. 

HMRC is reminding businesses of the steps they need to take to be ready. 

How to sign up to MTD VAT?

The business, or an agent on the business’s behalf, needs to:

  1. Visit GOV.UK and choose MTD-compatible software (such as Cashflow Manager)
  2. Keep digital records starting from 1 April 2022 or the beginning of their VAT period
  3. Sign up and submit their VAT Return through MTD. 

HM Revenue and Customs (HMRC) director general for transformation Joanna Rowland said MTD would benefit businesses once they’ve joined, by reducing errors and saving time in managing their tax affairs.  

“MTD is fundamental to the delivery of a trusted and modern tax system, making it easier for businesses to get their tax right and supporting the UK to go digital,” Ms Rowland said.  

“We encourage businesses to explore digital record-keeping for their VAT affairs and use this time to choose the right software to support their business needs.” 

What is Making Tax Digital (MTD) and why does it matter?

Making Tax Digital (MTD) for VAT is part of a huge overhaul of the UK tax system that involves the roll-out of mandatory digital reporting.   

In a recent independent study of over 2,000 businesses, 69% reported experiencing at least one benefit from MTD.  

These included preparing and submitting returns faster and increased confidence that they were getting tax right.  

Sixty-seven percent of businesses also felt MTD had reduced the potential for mistakes in at least one aspect of the record keeping, preparing, and submitting returns process. 

Some VAT-registered businesses may be eligible for an exemption from MTD, if it is not reasonable or practicable for them to use digital tools for their tax. Go to GOV.UK for more information on how to apply for an exemption.  

However, HMRC warned that those who do not join, and do not have an exemption, may be charged a penalty for failure to do so. 

Try Cashflow Manager today – free for 30-days. No credit card required.  

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