VAT and Making Tax Digital
With the 1st of April 2022 fast approaching, how does the Making Tax Digital (MTD) for VAT legislation affect you?
Definition of VAT: VAT is an acronym for Value Added Tax. It’s a tax that’s applied to the price of goods, services and other taxable supplies that are bought and sold within the UK.
Do I need to be VAT registered?
In the UK, any business with a taxable turnover of £85,000 or over must be VAT registered. If your turnover is lower than this threshold you can opt to be VAT registered, but it’s not a legal requirement. Once you have registered for VAT you’re then required to charge VAT on all items or services you sell to customers.
From the 1st of April 2022 – Making Tax Digital
Previously, all tax returns forms were required to be submitted through the Government Gateway and digital submission was only mandatory for businesses earning more than the £85,000 threshold.
From the 1st of April 2022, all VAT registered businesses – regardless of turnover value – must use compliant digital software to manage their VAT and other records. It may seem expensive or time-consuming to move part of your business activity to a digital gateway, but it can be simple with accounting software such as Xero, Quickbooks or FreeAgent.
Importance of budgeting for VAT liability
If you pay your VAT monthly or quarterly, the deadline for submitting your return and paying any VAT you owe is one calendar month and seven days after the end of the VAT period. For example, if you have a quarterly VAT Return that covers the 1st of January to the 31st ofMarch, your submission and payment deadline would be 7th of May.
It’s important to keep this payment in mind as VAT reclaimed on purchases and VAT charged from selling goods and services will accumulate over the VAT period, and then any VAT owed will need to be paid to HMRC.
VAT in Float
We are working on a way to make VAT planning easier in Float. Many of our customers have identified VAT as a pain point when it comes to cash flow forecasting, so it’s important for us to create a solution that will help our customers.
Let us know how you would like to plan for VAT in your cash flow by getting in touch at email@example.com