Making Tax Digital for VAT comes into force today for all VAT-registered businesses
Making Tax Digital is mandatory for all VAT-registered businesses from 1 April 2022. HMRC are asking businesses to sign up now and select their MTD compatible software.
MTD helps taxpayers get their tax returns right by reducing common mistakes as well as saving time managing their tax affairs and is a key part of the overall digitalisation of UK tax. Evidence shows MTD is succeeding in its central aims of reducing errors, while also making it faster to prepare and submit returns, and boosting productivity for businesses.
Since April 2019, businesses with a taxable turnover above £85,000 have already been required to follow MTD, keeping digital records and filing VAT returns using MTD compatible software. In July 2020, it was announced that all VAT-registered businesses must file digitally through MTD from April 2022, regardless of turnover.
VAT-registered businesses that have not yet signed up to MTD for VAT should do so now. All VAT-registered businesses must use MTD for VAT for their first VAT return starting on or after 1 April 2022. Businesses should use the time left to choose the software that is right for them, whether that is one of the simple free options available, or a more advanced product for those with more complex affairs.
Agents can sign up on behalf of a business, although businesses remain responsible for meeting their VAT obligations. Those who do not join may be charged a penalty for failure to do so.
There are a range of compatible software products available for MTD for VAT, allowing businesses to choose which tools they use to run their business and tax affairs. A , including free and low-cost options, can be found on GOV.UK.
To sign up to MTD for VAT, businesses, or an agent on a businesses’ behalf, need to:
Step 1: Visit GOV.UK and
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
There is a range of support and information available for those that need it – including accessible online content such as YouTube videos, GOV.UK help pages and HMRC’s Extra Support service.
HMRC understands that some businesses will find it easier to comply with MTD than others. For those who need more , HMRC is running a series of webinars.
Some VAT-registered businesses may be eligible for an exemption from MTD, if it is not reasonable or practicable for them to use digital tools for their tax. If a business has previously been granted an exemption for VAT online filing, this will carry over to MTD for VAT requirements. Go to GOV.UK for .
Example from businesses who are currently benefitting from MTD for VAT can be found on YouTube.
Businesses can choose to register themselves for MTD or can ask their agent to do this for them.
Businesses, or an agent on their behalf, must sign up to MTD for VAT via GOV.UK to fully join MTD. They must have MTD-compatible software before signing up.
Businesses should ensure that they sign up to MTD at least 5 days after their last non-MTD VAT return deadline date, and no less than 7 days before their first MTD for VAT return deadline date to avoid paying for their VAT twice.
Businesses must keep digital records through MTD. This can be done via software. Where a business chooses to use bridging software (a type of recognised MTD compatible software which extracts information from a business’s spreadsheet and then submits it to HMRC in a way which is compliant with MTD requirements) digital links must be in place to ensure that records are kept digitally as information is transferred between different platforms.
Businesses need to have signed up to MTD for their first VAT return starting on or after 1 April 2022. They may not be required to make their first submission via MTD until Summer 2022.
If you need further support, please call the IGI Member Helpline on 01788 225 908 or email .