VAT returns and Making Tax Digital (MTD)
The government's philosophy behind Making Tax Digital (MTD) is to "build a trusted, modern tax administration system." At Books & Business, we can help you achieve MTD compliance with tailored packages designed to meet all needs and budgets.
UK VAT Compliance Overview
Registering for VAT
- Businesses must register for VAT if their taxable turnover exceeds the threshold set by HM Revenue & Customs (HMRC). The threshold is currently (2025) £90,000
- Upon registration, businesses receive a unique VAT number which must be used on invoices and VAT returns
VAT Rates
- The standard VAT rate in the UK is 20%. There are also reduced rates (5%) and zero rates for certain goods and services
VAT Returns
- VAT returns must be submitted to HMRC, these are usually submitted quarterly but, in some cases, can be submitted monthly. These returns detail the VAT collected on sales and the VAT paid on purchases.
- Businesses can file VAT returns online but must use accounting software that is compatible with MTD
VAT Compliance Controls
- HMRC provides guidelines for good practice in VAT accounting and compliance processes. These include maintaining accurate records, timely submission of returns, and proper invoicing
Penalties for Non-Compliance
- Failure to comply with VAT regulations can result in penalty points, surcharges, penalties, interest on unpaid VAT, and potential legal action
Reclaiming VAT
- Businesses can reclaim VAT on goods and services used exclusively for business purposes. This is done through the VAT return process
Making Tax Digital (MTD)
- The MTD initiative requires businesses to keep digital records and submit VAT returns using compatible software
Common mistakes in VAT compliance and how Books & Business can help
1. Incorrect VAT Filings
Mistake: Misclassifying goods or services, applying incorrect VAT rates, or misunderstanding exemptions.
How to Avoid: Books & Business provides accurate VAT filings by using VAT-compliant accounting software and offering regular staff training. Our team stays updated with the latest VAT regulations to prevent misclassifications and errors.
2. Missed Deadlines:
Mistake: Missing submission or payment deadlines can result in penalties and interest charges.
How to Avoid: Books & Business sets up automated reminders and manages your VAT deadlines, ensuring timely submissions and payments. We offer comprehensive VAT management services to keep your business compliant.
3. Failure to Register for VAT on Time
Mistake: Delayed registration can lead to fines and backdated VAT payments.
How to Avoid: Books & Business monitors your revenue and advises on the optimal time to register for VAT. We handle all documentation and registration processes to secure your VAT number promptly.
4. Inadequate Record Keeping
Mistake: Poor record keeping can lead to errors in VAT returns and compliance issues.
How to Avoid: Books & Business maintains accurate and detailed records using digital tools. We conduct regular audits to ensure your records are up-to-date and compliant with HMRC requirements.
5. Misunderstanding VAT Rules
Mistake: Confusion around VAT rates, exemptions, and reporting requirements.
How to Avoid: Books & Business takes care of all VAT-related tasks for you, ensuring the correct rates and exemptions are applied. Our knowledgeable team is available to address any questions and ensure compliance.
By partnering with Books & Business, you can navigate the complexities of VAT compliance with confidence. Our tailored solutions and proactive approach help you avoid common mistakes and ensure your business remains compliant with UK VAT regulations.
Disclaimer: The bookkeeping services provided by Books & Business are based on the information supplied by our clients. We cannot be held responsible for any inaccuracies or omissions in the data provided. For personalised advice, please consult a certified accountant or financial advisor.
Simplifying Your VAT Compliance Journey
Navigating VAT compliance may seem daunting, but with the right support, it becomes manageable. If you are thinking of using QuickBooks as your MTD software, Books & Business offers extensive training. We can demonstrate how QuickBooks works from the initial setup through to reconciling all your accounts and submitting that all-important VAT return.
For now, MTD is just for VAT submissions. Non-VAT registered businesses have until April 2026 to get on board with MTD for Income Tax (ITSA), but it would be wise to get things in place well before the deadline.
Whatever stage you are at, whether you haven’t even started thinking about MTD or you already have QuickBooks in place but haven’t quite got your head around it, we are here to help. Get in touch with us todayto discuss how we can support your VAT compliance needs.
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