Nearly all VAT registered business will be required to file their VAT returns online and pay any VAT due electronically from April 2012. 

Almost 80% of all VAT businesses already file their VAT returns online.  A special VAT Notes supplement accompanies VAT returns for periods ending October to December 2011.     

HMRC will write to all businesses affected by the change in February 2012 to explain what to do. 

VAT online: at a glance

  • If your turnover is less than £100,000 and you were registered prior to 1 April 2010 you will be required to file online for VAT periods begining on or after 1 April 2012.
  • If you registered for VAT after 1 April 2010 you are already required to file online.
  • If your turnover is more than £100,000 you are also already required to file online.
  • You are not required to file online when entering into insolvency or if you have religious grounds for not using electronic equipment.

Penalties: period of grace

HMRC says that it is not going to issue paper returns from 1 April 2012, and so if your computer blows up or broadband fails and there is no BT Openreach vehicle in sight, or you are simply unable to use computers because you do not have the necessary skill sets, the only method of filing will be by telephone. The alternative will be for taxpayers to communicate their VAT figure in a letter.

HMRC is not levying penalties for the first year for those who are being forced to file online for periods begining on or after 1 April 2012, if they fail to file online in that period.

The leading tax bodies have expressed major concerns about HMRC's approach to compulsory online filing. There are two key issues:

1. Lack of reliable broadband in rurual areas: this is going to be an issue for years to come as HMRC seems not to realise that the Government is not ensuring that there is full broadband throughout the UK until 2015.

2. HMRC has ignored what was understood to be Government policy: there should be no new administrative burdens imposed on small business until 2014.

We recommend that VAT registered businesses who are still filing on paper keep a copies of blank VAT returns to use for emergencies after 1 April 2012. We are not publishing contact addresses to use for HMRC VAT because they are likely to change before 1 April 2012. It has been noted (at times) that HMRC appears not to publish addresses online in order to ensure that taxpayers do not use the post, or it may be that the search engines deliberately suppress them. We do not know the answer. Ensure that you keep a proof of posting.

Advice from HMRC

HMRC strongly recommendsthat you take steps to become familiar with the online service well in advance of the April deadline. – you can find some useful step by step guides on the HMRC website (see links below) and also an online demonstrator which shows the screens you’ll expect to see within the online service: 

You can also find out more information about paying HMRC including paying by online Direct Debit which currently gives you longer to pay and to file your return online.