What Are the New VAT Return Rules for 2023?
As businesses adapt to the Making Tax Digital (MTD) initiative, new regulations for VAT-registered companies have come into effect. Beginning in November 2022, VAT-registered businesses must file their VAT returns using MTD-compliant software. In addition to this transition, HMRC introduced a new penalty system in January 2023 for late or unpaid VAT returns. These changes apply to VAT return periods starting on or after January 1, 2023.
Previously, businesses that failed to submit their VAT returns on time or did not ensure the payment was cleared in HMRC’s bank account by the due date were subject to the default surcharge regime. Under this system, businesses in default faced surcharges, which ranged from 2% to 15% of the VAT due, depending on the frequency of defaults within a 12-month period. Businesses with revenues under £150,000 were given more lenient treatment, receiving guidance to help them comply.
However, the default surcharge regime applied equally to all VAT-registered businesses, sometimes resulting in harsh penalties for those who missed deadlines infrequently. The new penalty system, effective from January 2023, introduces a points-based system for late filing and late payments, aiming to impose penalties that better reflect the level of non-compliance.
What Are the Main Items Exempt from VAT?
While many items are exempt from VAT, some of the primary categories include:
- Sporting activities and physical education
- Education and training
- Financial services, insurance, and investments
Can I Submit a VAT Return Without MTD?
As part of Making Tax Digital (MTD), all VAT-registered businesses must use MTD-compliant software to maintain digital records and file VAT returns. HMRC will impose penalties on businesses that fail to comply with these requirements. Penalties can include:
- Fines up to £400 for each VAT return not submitted using ‘functional compatible software’
- Daily fines ranging from £5 to £15 for not maintaining digital records within the software
- Fines up to 100% of the VAT owed if errors occur due to not using the software’s ‘checking functions,’ along with the requirement to pay the outstanding VAT
What Are the New VAT Return Deadlines?
To avoid penalties, it’s crucial to submit your VAT returns on time. The deadline for submitting your return is one month and seven days after the end of your VAT period, whether you file monthly or quarterly.
Here are the key VAT return submission dates for the 2023/24 tax year:
- 7 April 2023: Deadline for VAT returns and payments for the accounting quarter ending 28 February 2023
- 7 May 2023: Deadline for VAT returns and payments for the accounting quarter ending 31 March 2023
- 7 June 2023: Deadline for VAT returns and payments for the accounting quarter ending 30 April 2023
- 7 July 2023: Deadline for VAT returns and payments for the accounting quarter ending 31 May 2023
- 7 August 2023: Deadline for VAT returns and payments for the accounting quarter ending 30 June 2023
- 7 September 2023: Deadline for VAT returns and payments for the accounting quarter ending 31 July 2023
- 7 October 2023: Deadline for VAT returns and payments for the accounting quarter ending 31 August 2023
- 7 November 2023: Deadline for VAT returns and payments for the accounting quarter ending 30 September 2023
- 7 December 2023: Deadline for VAT returns and payments for the accounting quarter ending 31 October 2023
- 7 January 2024: Deadline for VAT returns and payments for the accounting quarter ending 30 November 2023
- 7 February 2024: Deadline for VAT returns and payments for the accounting quarter ending 31 December 2023
- 7 March 2024: Deadline for VAT returns and payments for the accounting quarter ending 31 January 2024
Can I Submit VAT Returns Without Software?
As of April 1, 2022, all VAT-registered businesses must comply with MTD regulations, which require the use of compatible software to maintain VAT records and submit VAT returns. Although businesses were previously able to submit VAT returns via their VAT online account, this option ended on November 1, 2022. Now, all businesses must use MTD-compatible software for filing VAT returns. Failure to do so can result in penalties from HMRC.
Learn More with Quantum Bookkeeping
For more information on the new VAT return rules or any other services we offer, including self-assessment, feel free to reach out to the knowledgeable team at Quantum Bookkeeping. We are here to assist you with all your accounting needs and answer any questions you may have.
