The existing VAT online account can no longer be used to submit quarterly or monthly VAT returns. The only way to file these VAT returns is through Making Tax Digital (MTD) compatible software. Businesses that file annual VAT returns are still able to use their VAT online account and will automatically be signed up after 15 May 2023.
What businesses need to do now, or they could face a penalty
If you haven’t started using compatible software already, you must follow these steps now:
Step 1. Choose MTD-compatible software that’s right for the business – a list of software including free options, is on GOV.UK.
Step 2. Check the software permissions to allow it to work with MTD. Go to GOV.UK and search ‘manage permissions for tax software’ for information on how to do this.
Step 3. Keep digital records for current and future VAT returns – more information about what records must be kept digitally is on GOV.UK.
Step 4. File future VAT returns using the MTD-compatible software – to find out how to do this, go to GOV.UK and search ‘record VAT’.
How to apply for an exemption from using MTD-compatible software
If you are already exempt from filing VAT returns online or your business are subject to an insolvency procedure, they’re automatically exempt from MTD. You can check if they can apply for an exemption on GOV.UK. HMRC will consider each application on a case-by-case basis.
If you miss the deadline for submitting your return, HMRC will record a ‘default’ on the account. You will not pay a charge the first time but if there’s a default again within 12 months, there may be a charge on top of the VAT owed. You can find more about the default surcharge on GOV.UK. From 1 January 2023 HMRC are introducing simplified penalties for late submissions and payments.
Late submission penalties will work on a points-based system. If return not submitted on time, a late submission penalty point and a fine may be received. Late payment penalties may be charged if not paid on time, depending on how late the payment is. Interest will be charged on late payments. You can find more information about the new VAT penalties on GOV.UK