Making Tax Digital For VAT Expansion From April

HMRC is asking businesses to ensure they're ready for the expansion of Making Tax Digital for VAT before it becomes mandatory from the 1st of April 2022 ...

From this point forward, all VAT registered businesses need to file digitally, regardless of turnover. So, this means anyone who is VAT registered, but below the £85,000 threshold still need to submit their VAT returns via digitally via Making Tax Digital (MTD).

"So, what do you need to do?"

Businesses should ensure they have signed up to MTD for their first VAT return on or after the 1st of April 2022. They may not need to file their first submission before the summer though. Signups must be done at least five days after their last non-MTD VAT return deadline date and no less than seven days before their first MTD VAT return deadline date. This ensures you don't pay VAT twice.

The new rules mean it is now mandatory to keep digital records under MTD. Where a business chooses bridging software rather than MTD-enabled accounting software, digital links must be in place to ensure that records are kept digitally when transferring between different platforms.

"MTD for VAT is the first part of the entire digitalisation of tax in the UK!"

HMRC says that their own research has shown that the majority of businesses find benefits from MTD for VAT saying they can prepare and submit returns faster and being confident they got the tax right at all times.

At least 1.6 million taxpayers have already joined Making Tax Digital for VAT with over 11 million returns submitted. So, far, around one-third of VAT-registered businesses with a turnover below £85,000 have signed up to MTD for VAT ahead of the April 2022 deadline.

To sign up to MTD VAT, businesses, or an agent on a businesses' behalf, need to:

- Step 1: Visit gov.uk and choose MTD-compatible software - Step 2: Keep digital records starting from 1 April 2022 or the beginning of their VAT period - Step 3: Sign up and submit their VAT return through MTD

Agents can sign up on behalf of a business, although businesses remain responsible for meeting their VAT obligations.

There are some VAT-registered business who may be exempt from MTD for VAT where it is not reasonable or practicable to use digital software for their tax. Any previous exemptions will be carried over to the new system.

Remember that Making Tax Digital for Income Tax will now be introduced in 2024.

If you feel inspired to find out more about anything I've said here, do call me on 01908 774320 or leave a comment below and I'll be in touch as soon as I can.