A blog by Connor Henderson
Value Added Tax (VAT)
We’ve all heard of it, but what is it and how does it affect you?
VAT is a tax which is added to goods and services bought and sold within the UK & EU. The rate of VAT is set by the Government and is currently 20%. You must register for VAT if your taxable turnover goes over £85,000. This is called the VAT threshold, and you must register if you know the taxable turnover will go over this within the next 30 days. Your taxable turnover is the total of everything sold that is not VAT exempt.
Making Tax Digital (MTD)
In 2017, HMRC announced a new initiative to make submitting tax returns simpler for taxpayers, as well as “transforming the tax system” and making HMRC’s tax administration more effective and efficient. This initiative is called Making Tax Digital (MTD). The announcement of MTD also coincides with the growth of use of cloud accounting software within the UK, such as Xero.
As per the HMRC guidelines, if you are VAT registered and have had VAT-able sales above the VAT threshold, you need to file your VAT returns that start on or after 1st April 2019 using HMRC’s new MTD system. If you file quarterly, this means your first VAT submission using the MTD process will be for the period ending 30th June.
You accountant should know that you have a million other things to be focused on whilst running your business, so should be registering and setting your company up for MTD if it applies to you. We are at Blu Sky, all through Xero! When signing you up for MTD or connecting Xero to HMRC, your accountant may contact you for an HMRC access code, depending on how your government gateway is set up.
If you do have any questions about VAT & MTD, please speak to your Accountant or give us a call!
