Cheat Sheet: The move to online VAT filing

HMRC busting some electronic moves...
Written by Natasha Lomas, Contributor

HMRC busting some electronic moves...

VAT returns online eh? I'll just slip my lever-arch files into something more comfortable then...
Quit the sarcasm - admin makes the business world go round, so listen up.

Understood - I'm all ears.
Good. HM Revenue and Customs has changed its policy regarding VAT filing. As of 1 April 2010, if your company has annual revenue of more than £100,000 (excluding VAT), you must submit your VAT returns online - and pay any VAT due electronically.

Back in February HMRC will have sent you a letter if your business' annual turnover was more than £100,000 on 31 December last year - yes, without the slightest trace of irony, they will have used a paper-based notification to tell you of the need to switch to online filing.

The letter will also have included a guide about registering and enrolling for its VAT Online Services - the first step to filing your VAT online - so you should already have been pre-warned if the change affects your business. You do still read your snail mail don't you?

Not so much...
Luckily for you then, HMRC has produced an online guide to signing up to VAT Online Services - check it out here.

But I'm a start-up SME and my turnover isn't more than £100,000 - so can I avoid this online filing stuff?
Not necessarily. How much of a newbie are you? If you only registered for VAT on or after 1 April you will have to submit your returns online regardless of how much your coffers are holding.

What about if my turnover drops below £100,000 in future - can I go back to paper-based filing?
Forget it. Once you've started online VAT filing, there's no stopping it. Digital is the future, don't you know.

VAT filing is moving online

Paper: HMRC wants to see a lot less of it from this month
(Photo credit: lotyloty via Flickr.com under the following Creative Commons licence)

But I haven't submitted a full set of VAT returns in the last year - should I file online or not?
HMRC will use any returns submitted in previous years to calculate an estimated turnover, or use your own estimated turnover from when you first registered for VAT.

What if there were errors in my returns - or I had a big one-off sale which I know won't happen again but which skews my revenue?
Chances are you'll have to suck it up and file electronically but that's no bad thing - did I mention, digital's the future?

If, however, you are sure your estimates contained errors and really wish to continue with paper filings alone, HMRC says it will "revisit" any estimated figures if you can demonstrate they were "not fair and reasonable". It will apparently "judge each case on its own merits".

What else should I be doing?
If you're self employed and have an accountant who does your VAT filing for you then have a chat with them to discuss the changes and ensure you meet the deadline for the first online return. There's more on VAT return deadlines from the HMRC here.

Alright then. So how different is this online VAT filing lark - am I going to have to retrain the whole finance department at vast expense?
HMRC says the Online Return is "very similar" to the paper version so it shouldn't be too, er, taxing a switch.

HRMC says the rules haven't changed at all and in theory it should also save you time.

Will I need any new software to do this online filing business? Is it going to be expensive?
Not at all. Since you're reading silicon.com I don't think it's stretching things to assume you have internet access and know how to use a computer - which is pretty much all you'll need. You don't even need broadband: HMRC says VAT Online Services has been designed to work even with dial-up internet connections.

All those switching to online filing need to select a preferred electronic payment method too - be it direct debit, telephone banking, bank giro or whatever - and set up the necessary arrangements. There's an HMRC guide on how to pay your VAT here.

If you're worried about forgetting to do your VAT filing without paper you can also set up an email reminder to help jog your memory.

Thanks! So, just so I know, if my business does bring in under £100,000 per year, and it was registered for VAT before 1 April 2010, will HMRC leave me and my beloved lever-arch files in peace?
Not for long. I'm afraid you're going to have to face up to the digital revolution sooner or later - by 2012, in fact, if not before.

HMRC says all VAT-registered businesses are likely to have to file their Returns online and pay electronically by 2012 "at the latest". In other words, that sound you can hear ringing in your ears right now? That's the sound of inevitability.

HMRC suggests it might, therefore, be prudent for all businesses to switch to its Online VAT Services sooner rather than later. It also reckons the move will save you time, and says that "in most cases" you'll get extra days to submit and pay.

I better get a move on then.
Just think of the trees you'll be saving.

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