VAT With Support from Making Tax Digital

From April 2019, HMRC are moving to their next phase of Making Tax Digital. This means that VAT registered companies with a turnover above the threshold will need to maintain their accounting records digitally and submit their VAT returns to HMRC electronically. As our packages are spreadsheet based, if you save a copy you will be compliant with the first requirement. For the second bridging software is needed.

The good news is that DIY Accounting have partnered with VitalTax, another small business, to enable you to submit your VAT from April 2019 onwards. VitalTax have adapted their Making Tax Digital API to map directly with the DIY Accounting packages. This simple video explains how it works.

The Excel add-in can be downloaded through the Microsoft Office Store with support provided through the VitalTax website. The add-in is being provided at no additional charge for the first year and may incur a small charge in the future. However, rest assured than any pricing will be proportionate to products offered by DIY Accounting Ltd.

VitalTax is provided by Vital Code Ltd. Their VAT filing system was created to comply with the changes to the HMRC submission requirements. VitalTax are included on the HMRC website as a current supplier of VAT compatible software having undergone their vetting process.

Sole traders whose sales turnover reaches the VAT threshold should register for VAT unless sales turnover has been exceptional and not likely to be repeated on an ongoing basis. In those cases HMRC should be notified that while the VAT threshold has been breached VAT registration is not being proposed as the sales that caused the threshold limit to be exceeded were exceptional and unlikely to be repeated in future trading periods.

When a business is not registered for value added tax purposes no VAT is added to the sales price. Goods bought from suppliers may include VAT input and this tax is treated by the business as a cost. The total purchase price including value added tax being included in the bookkeeping records of expenses. The sole trader accounting spreadsheets do not include separate columns for VAT inputs or outputs since neither are required.

Where business turnover is under the VAT threshold VAT registration with HMRC is not required although VAT registration can be voluntarily below the threshold level. Where a business sells the majority of its goods and services to the general public it is usually advantageous not to register for value added tax until it cannot be avoided. Where a small business customers are registered for VAT then it is often desirable from a financial standpoint to register voluntarily as sales are not affected by adding value added tax to the sales invoices and the VAT input paid on purchase invoices can then be reclaimed against the additional VAT income raised.

If the sole trader is certain that the business will not be registered for VAT then the sole trader accounts package is suitable. Businesses that are not registered for VAT do not need to keep VAT records. A business that is registered for VAT not only needs to keep vat records to support the quarterly VAT return but must also maintain a value added tax audit trail to support the quarterly tax return should the accounting records be subject to a VAT inspection by HMRC.

If the business is close to the VAT threshold or may exceed the vat registration threshold limit during the financial year or voluntary VAT registration is being considered then the self employed accounts would be more suitable as while the sole trader accounting spreadsheets are only suitable for non vat registered business the self employed accounting spreadsheets are designed to be suitable for both VAT and non VAT registered business.

Further guidance is available from the HMRC website value added tax portal at:

Introduction to VAT This is a summary of the most common value added tax issues and a good place to start finding out how it affects you and your business.

HMRC have a number of schemes available to make calculating and paying vat easier details of which can be found at: Choose the right VAT scheme for your business

Registering for VAT Registering for VAT is compulsory for some companies and voluntary for others. Find out how your business fits the bill and how to get registered.

Businesses can register for vat online at: VAT Online Registration Service
Brief descriptions of the full range of Accounting Software, Payroll Software, Company Formation are available on the DIY Accounting home page

"Self employed sole traders accounting spreadsheets under the VAT threshold limit with a non VAT registered business for value added tax"