Navigating the UK’s tax regulations can be daunting, especially with recent shifts towards MTD (Making Tax Digital). If you’re wondering how to file MTD for VAT – and how to do so in time – you’re in the right place! This guide breaks down the essential knowledge and steps required to file a successful and timely return.
By the end of this article, you should be equipped with both the knowledge and the confidence to start filing your VAT Returns on time.
What is Making Tax Digital?
Making Tax Digital is HMRC’s strategy for modernising the UK’s taxation system. In essence, it means that old-fashioned, paper-based tax returns are being replaced by more efficient, computerised methods. In the process, certain new obligations (e.g. more frequent tax updates) are being introduced.
What are MTD’s goals & outcomes?
One of the key aims for MTD is to reduce the so-called “tax gap”. In doing so, HMRC can derive benefit not only for itself but also for the taxpayer:
First, reducing the tax gap will lead to higher tax revenue via better compliance and fewer wasted resources. This means that more time and money can be directed towards public services such as the NHS and state education.
Second, the taxpayer’s experience in filing tax should be much improved. Instead of spending time and effort wading through physical tax forms (and supplementary pages), there is (or will be) a more user-friendly and convenient alternative. This should allow taxpayers and business owners more time and resources to focus on other tasks.
Who is affected by MTD?
At present, MTD is in force for all VAT-registered businesses. Therefore, anyone running a VAT-registered business should already know how to file MTD.
In the future, MTD for Self Assessment will be introduced in stages. When this happens, MTD will also affect sole traders (the self-employed) and landlords in general – regardless of their VAT status.
As such, a great many businesses and individuals are, or will be, affected by MTD. When the time comes, it’s important to select appropriate MTD-compatible software. One such example is AbraTax’s MTD for VAT service.
How to Submit a VAT Return with AbraTax?
Submitting your VAT Return with AbraTax is extremely quick. Once registered with AbraTax, you can comply seamlessly with MTD for VAT in three simple steps:
Step 1: Download the AbraTax Excel template
Step 2: Digitally link seven* cells from your bookkeeping
Step 3: Re-upload the template for submission
*Although HMRC requires nine financial figures for the VAT Return, two of these are automatically calculated for you in the VAT template. We really think it couldn’t be easier!
An added bonus is that you can try our HMRC-recognised service for free. This means you can test it out and see for yourself – at no cost! Here’s a breakdown of each step:
Step 1: Download the AbraTax Excel template
- From your AbraTax dashboard, click “File Return”.
- From here, you can download the Excel template.
- Once downloaded, open it.
- Drag and drop the template into your existing spreadsheet:
You’re now ready to digitally link your spreadsheet’s cells with the template.
Step 2: Digitally link the cells
- To start creating digital links, enter “=” in the “Value” column.
- Navigate to your business’s financial data and select the corresponding value:
- Repeat this step for each box (note that boxes 3 and 5 will be calculated automatically).
Step 3: Re-upload & submit
Once all values are filled in for the nine boxes, it’s time to export and re-upload:
- Right-click the template’s tab, then left-click “Move or Copy…”:
- Select “(new book)” from the drop-down menu beneath “To book:”:
- In the new book, navigate to “Save As” and select “CSV (Comma delineated) (*.csv)”:
- Upload the .csv file to the “File Return” page (in your AbraTax dashboard).
- To submit, simply click “Submit Return” and “File with HMRC”.
Congratulations on your successful VAT Return! If you follow these steps, you should find yourself complying in time and with ease.
Prerequisites
In line with MTD regulations, all VAT-registered businesses must maintain digital financial records. Accordingly, AbraTax VAT is designed to integrate seamlessly with existing Excel spreadsheets. This is because we know taxpayers are more familiar with Microsoft Excel than any other data manipulation program.
In essence, Excel bridging software is the most convenient option, requiring the least time and effort.
FAQs
What is a digital link?
“Digital links” are part of HMRC’s initiative to reduce manual errors when manipulating data. Essentially, they facilitate the direct transfer of data rather than copying and pasting. For instance, by linking cells in Excel you avoid the need to manually copy and paste figures.
Is it okay to use Excel for my VAT data?
Absolutely. Although Microsoft Excel is not per se MTD-compatible, this is where our bridging software helps. By using bridging software to file your MTD VAT Return, AbraTax allows you to continue using Excel to maintain your digital records. When it’s time to file your tax, we “bridge” the gap between your spreadsheet and HMRC.
Does AbraTax give free trials?
Yes. You can submit your first VAT Return with us for free. We’re confident that you’ll agree with us: AbraTax’s VAT Return service is the best way to file MTD.
Do I need to register for Making Tax Digital (MTD) before using AbraTax?
Yes. However, all VAT-registered businesses must now comply with MTD. This means that if you register your business for VAT, you are automatically registered for MTD too.
If you have not registered for VAT, and your business meets the eligibility criteria, you should register as soon as possible.
Once you have registered for VAT, filing VAT via AbraTax is straightforward. Start by clicking “Add New VAT Registration” from your dashboard:
Enter your business’s name and VAT number. After clicking “Add”, select “Grant AbraTax Access”:
From here, sign into Government Gateway with your usual details. Note that we provide a fully GDPR-compliant and HMRC-recognised MTD service:
Once signed in, you’re ready to start filing MTD!
What information do I need to submit a VAT Return in AbraTax?
Government Gateway login
Before submitting a VAT Return, you must have your Government Gateway details to hand. This is how you will link your AbraTax dashboard with HMRC (to file MTD for VAT). See directly above for details.
Bookkeeping
To submit your VAT Return with us, you only need nine financial figures. (Technically, you only need seven because we calculate two of those for you!) These figures should be readily available from your business’s routine bookkeeping. Here’s what they are:
Box 1: VAT due on sales and other outputs
Box 2: VAT due on acquisitions of goods made in Northern Ireland from EU member states
Box 3: Total VAT due (automatically calculated)
Box 4: VAT reclaimed on purchases and other inputs (including acquisitions from the EU)
Box 5: Net VAT to pay HMRC, or to reclaim (automatically calculated)
Box 6: Total value of sales/all other outputs excluding any VAT
Box 7: Total value of purchases/all other inputs excluding any VAT
Box 8: Total value of all supplies of goods/related costs, excluding VAT, from Northern Ireland to EU member states. (Any amounts here should be included also in box 6.)
Box 9: For acquisitions of goods and related costs, excluding any VAT, from EU member states into Northern Ireland. (Any amounts here should be included also in box 7.)
How do I check if my VAT Return was successfully submitted?
When you file your VAT Return via AbraTax, you will receive instant confirmation, along with your unique HMRC receipt ID:
After a short time, your VAT Return will appear in your HMRC account.
What happens if I make a mistake on my VAT Return?
Don’t panic! HMRC has made provisions to deal with tax errors. The steps you need to take depend on your individual circumstances. In general, though, it is advisable to flag and correct the error as soon as possible.
For relatively minor errors in your records, HMRC recommends amending your records and storing an explanatory note. However, if you have already filed your VAT Return, you should refer to further HMRC guidance and/or contact HMRC’s dedicated VAT helpline.
What happens if I need more time?
Since it is a legal obligation for eligible businesses to comply with VAT, it is best to do everything in your power to file your returns on time. Failing to do so can lead to penalties such as fines. However, HMRC understands that certain extenuating circumstances might occur, preventing you from complying on time.
Such mitigating circumstances might include sudden illness, severe disability, or extreme financial issues (such as insolvency or bankruptcy). In the event of such events, or if you expect to fail to comply with upcoming tax obligations, you should contact HMRC immediately.
Conclusion
Making Tax Digital represents a massive step towards modernising the UK’s tax system. That being said, the new MTD system for VAT is actually pretty simple. Having read our in-depth guide, we hope you agree – and you should no longer be wondering how to file MTD for VAT in time.
With AbraTax’s Excel bridging service, filing returns on time doesn’t have to be a worry: in three simple steps, you can get the job done! Sign up with AbraTax now and make MTD for VAT easy.