MTD for VAT now live in Xero
If you are VAT registered and you use Xero, you will now be able to use the MTD for VAT compliant report within the system. If you submit your own VAT returns there are a couple of steps to be gone through to set this up and don't worry if you're not ready yet - the first MTD compliant returns aren't compulsory yet and you can still use the old-style reports. We'll explain below how all this works. However if we submit your returns as part of our bookkeeping service we'll handle the switch to the new reports.
Firstly when you open the VAT return report you will see a new-look screen with a 'Needs Attention' warning at the top. At the bottom you'll also see a link labelled "Open non-MTD VAT returns". This will take you back to the old report screen. Registering for MTD with HMRC can take a few days so we'd recommend that if you have a VAT return due on 7 April that you continue to use the old style of return. If your next return deadline is a little further off then now would be a good time to switch, unless you have a reason for holding off on MTD compliance, for example if you are used to entering batches of invoices and need time to start processing each individual supplier bill to comply with the new rules.
If you're not sure of the date that you need to be compliant by, the list below will give you a guide, based on your VAT frequency/period:
- Monthly VAT returns - VAT return period commencing on 1 April 2019, filing deadline 7 June 2019
- Quarterly returns ending March/June/September/December - VAT return period commencing on 1 April 2019, filing deadline 7 August 2019
- Quarterly returns ending April/July/October/January - VAT return period commencing on 1 May 2019, filing deadline 7 September 2019
- Quarterly returns ending May/August/November/February - VAT return period commencing on 1 June 2019, filing deadline 7 October 2019
If you do choose to hold off on MTD for now, please ensure that you wait until your last non-MTD VAT return has been submitted and the direct debit has cleared, and then allow at least 21 days between the date you start the signup process and the filing date for your first MTD return. For example, for quarters ending 30 June 2019 this should be done between 15 May 2019 and 17 July 2019. This is to allow for potential delays at HMRC's end which may prevent you from being able to file on time, and to allow for changes in your VAT direct debit, if you have one. If you aren't sure about the dates, please contact us.
To set up MTD, please take the following steps:
- Check your contact email address with HMRC. As part of the signup process HMRC may prompt you to confirm your email address. Please ensure that you do this as HMRC must have an up to date email address for you in order to communicate. We have been advised in particular that if you have a direct debit for VAT this may fail if HMRC do not hold the correct email address, as the direct debit guarantee requires them to communicate payment details with you.
- Get set up with HMRC. A link to HMRC's own guidance can be found HERE. Follow the 'sign up' link once you have your login details to hand (including your mobile phone if you have set up a text response on 2-factor authentication), and check your email address as mentioned at step 1. Following the link will take you to a series of screens where HMRC will confirm that you use accounting software and that your software is MTD ready (answer 'yes' to both), then you will be prompted to log in to your HMRC account and sign up for MTD. Once this has been done HMRC will send a confirmation email within 72 hours. Only once you have this will you be able to connect Xero and submit returns.
- Connect Xero to HMRC. Once you have had HMRC's confirmation that you are signed up to MTD, within Xero go to Accounting and then VAT Return (or Accounting/Reports/VAT Return). Then select 'connect to HMRC' and follow the prompts to authorise Xero to interact with HMRC on your behalf.
This then creates a two-way link between Xero and HMRC but don't worry, HMRC only receive information from Xero when you send a return. The other side of the link allows HMRC to tell Xero which VAT return period it is expecting next.
We'll cover the actual filing process for an MTD VAT return in a future news article.
Finally, if you are VAT registered but MTD doesn't apply to you at the moment, just switch back to the old-style reports.