Under the Making Tax Digital (MTD) rules, businesses must use software to submit their VAT returns unless their annual turnover is less than £85,000.
If you have acquired new accounting software to comply with MTD for VAT, it’s worth checking whether it’s been set up to reflect the circumstances of your business. For example:
• Have the opening balances for debtors and creditors been correctly entered?
• Does the software recognise the use of the cash accounting scheme?
• Is the software using the correct percentage to calculate the VAT due under the flat rate scheme?
• Is the software correctly identifying which purchases are zero-rated or standard rated from bank feeds?
Before you submit your first VAT return using your new software, review the draft return for obvious errors and inconsistencies. We can help you with that.
Penalties arising from inaccurate VAT returns apply at up to 100% of the VAT underpaid as a result of a careless or deliberate error. A problem with setting up new accounting software may be accepted as a reasonable excuse for submitting a VAT return containing an error, but you need to correct any mistakes as soon as they are discovered.
