How does QuickBooks Online work for Making Tax Digital (MTD) for VAT?

May 05, 2023

This blog will explain everything about the latest Making Tax Digital changes. Also, it will elaborate on MTD's effects on your business and thoroughly guide you about its readiness for VAT.

About Making Tax Digital

Making Tax Digital is HMRC's transformation towards an online UK taxation system, switching from papers and spreadsheets to a new digital system. To embrace this digital shift, businesses across the UK to retain digital records with functional-compatible software from April 2021.

Further, the digital accounting software must have the ability to connect directly to HMRC. It means HMRC will accept VAT returns through MTD-compliant software to communicate directly with their system. These software solutions include QuickBooks, Sage, Xero etc. We will explain QuickBooks Online in this blog which can fully integrate with HMRC.

What are the MTD changes?

Initially, MTD rules application was on the businesses with a VAT-taxable turnover above the £85,000 threshold. In April 2022, HMRC went a step ahead that all VAT-registered businesses must utilise MTD-compliant software to connect directly with HMRC. Following are the present MTD changes and deadlines:

  • April 2021 - HMRC has removed submit VAT returns option from their website.
  • April 2022 - MTD become mandatory compliance for all VAT-registered businesses. Businesses must utilise MTD-compliant software to connect directly with HMRC for VAT returns submission.
  • November 2022 - The old VAT portal closed, and businesses will no longer file VAT returns using their online VAT account.
  • April 2024 - HMRC applied MTD for Income Tax to landlords and self-employed businesses with annual property or business income over £10,000.
  • April 2026 - MTD for Corporation Tax may come into effect. It will apply to incorporated organisations and businesses within the charge to Corporation Tax.

This blog will further help in learning about switching on the Making Tax Digital (MTD) for VAT feature in QuickBooks Online (QBO). Also, it will tell you how to submit VAT returns in an MTD-compliant way. Only submitting digital VAT returns can not automatically makes your business MTD compliant. It needs to sign up to MTD before enabling it into Intuit Quickbooks.

Does MTD affect your business?

HMRC requires all VAT-registered businesses must sign up for MTD no matter what they earn from April 2022. It requires the following for MTD sign up:

  • Latest VAT return
  • VAT registration number
  • Company registration number 
  • Email address of your business
  • Government Gateway user ID and password
  • National Insurance number for a sole trader
  • Unique Taxpayer Reference (UTR) for a limited company
  • UTR and the postcode for Self Assessment for a general and limited partnership

Do you become compliant if you submit your VAT return online?

HMRC requires your MTD for VAT registration on their website. You can choose QuickBooks Online (QBO) for connecting to HMRC. Only submitting your VAT return online does not make you MTD compliant.

How can you sign up for HMRC MTD?

Early registration for the new MTD service helps you submit your return promptly. You must sign up for MTD a minimum of one week before your filing deadline. HMRC will send an email confirmation at your MTD sign up completion. 

Also, HMRC will confirm via email in 72 hours by providing your new MTD Government Gateway user ID and password. This stage allows you to turn on MTD and connect QuickBooks directly to HMRC, an authorising process. You must check the following before the MTD registration start:

  • No unsuccessful or pending VAT returns
  • Correct registration number
  • Correct VAT scheme

Further, you will need to register the following information:

  • The latest VAT return
  • Business email address
  • VAT registration number 
  • Government Gateway user ID and password.

Once you have registered, HMRC will send you an email confirmation within 48 to 72 hours. It will contain your new MTD Government Gateway user ID and password. You must note it because it is necessary to reauthorise QuickBooks every 18 months, the GDPR rules compliance. Also, there will be no access to the old service. You will file all VAT returns from that point forward using QuickBooks Online.

QuickBooks learning at KBM

You can adequately learn QuickBooks accounting software from KBM. Our dedicated QuickBooks Pro Advisors expert team helps you learn QuickBooks, Xero and other software solutions effectively. Also, you can benefit from our following QuickBooks learning programmes:

These programmes thoroughly prepare you for the following job roles and self-employment:

  • Cloud Accountant
  • Digital Accountant
  • Digital Bookkeeper
  • Quickbooks Proadvisor
  • Quickbooks Accountant
  • QBO Online Bookkeeper
  • QuickBooksuk Accountant
  • QuickBooksuk Bookkeeper  

What are the other benefits of QuickBooks Online software?

QuickBooks accounting software benefits go beyond MTD. It provides real-time insights into your business's financial health. On the other hand, receipt-capturing and QuickBooks invoicing options help manage various complex financial tasks.