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Making Tax Digital for VAT is mandatory for all VAT-registered businesses from 1 April 2022

Making Tax Digital for VAT is mandatory for all VAT-registered businesses from 1 April 2022

31 January 2022

HMRC are reminding businesses to take steps to prepare for Making Tax Digital for Value Added Tax (VAT) before it becomes mandatory for all VAT-registered businesses from 1 April this year.

Making Tax Digital for VAT is part of the overall digitalisation of UK Tax, and is designed to help businesses eliminate common errors and save time managing their tax affairs.

Since April 2019, businesses with a taxable turnover above £85,000 have already been required to follow Making Tax Digital, keeping digital records and filing VAT returns using Making Tax Digital compatible software.

In July 2020, it was announced that all VAT-registered businesses must file digitally through Making Tax Digital from April 2022, regardless of turnover. HMRC is now reminding businesses below the £85,000 threshold of the steps which they need to take to be ready.

To sign up to Making Tax Digital VAT, businesses, or an agent on a businesses’ behalf, need to:

  1. Visit GOV.UK and choose Making Tax Digital-compatible software
  2. Keep digital records starting from 1 April 2022 or the beginning of their VAT period
  3. Sign up and submit their VAT Return through Making Tax Digital

If businesses have not yet signed up to Making Tax Digital for VAT, they should do so now to ensure they are ready in time for the April 2022 deadline.

Businesses can find help and support on how to sign up for Making Tax Digital on GOV.UK.

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.

For businesses who need help and support on signing up for Making Tax Digital, HMRC is running a series of webinars. More information can be found on HMRC’s Making Tax Digital help page.

HMRC recognise that some businesses will experience upfront costs in joining Making Tax Digital. There are a range of compatible software products available for Making Tax Digital for VAT, allowing businesses to choose which tools they use to run their business and tax affairs. A list of software compatible with Making Tax Digital for VAT, including low-cost options is available on GOV.UK.

Some VAT-registered businesses may be eligible for an exemption from Making Tax Digital, 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 Making Tax Digital VAT requirements. Information on how to apply for an exemption is available on GOV.UK.

Example case studies from businesses who are currently benefitting from Making Tax Digital for VAT are ready to watch on YouTube.

Further information

Businesses can choose to register themselves for Making Tax Digital or can ask their agent to do this for them.

Businesses, or an agent on their behalf, must sign up to Making Tax Digital for VAT via GOV.UK to fully join Making Tax Digital. They must have Making Tax Digital-compatible software before signing up.

You should ensure that you sign up to Making Tax Digital at least 5 days after your last non-Making Tax Digital VAT return deadline date, and no less than 7 days before your first Making Tax Digital VAT Return deadline date or you may pay for your VAT twice.

Businesses must keep digital records under Making Tax Digital. This can be done through software. Where a business chooses to use bridging software, 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 Making Tax Digital for their first VAT return starting on or after 1 April 2022. They may not be required to make their first submission via Making Tax Digital until Summer 2022.

Making Tax Digital for Income Tax Self Assessment

Last year, the government announced that Making Tax Digital for Income Tax Self Assessment will be introduced a year later and will now come into effect in the tax year beginning in April 2024, giving businesses more time to prepare.

If you need further support, please call the IGA Member Helpline on 01788 225 908 or email enquiries@rmif.co.uk.