Making tax digital for VAT – April 2022 – Are you prepared?

Since 1 April 2019, VAT-registered businesses with a turnover above the VAT registration threshold of £85,000 have been required to keep their records digitally and provide their VAT return information to HMRC through MTD-compatible software.

VAT-registered businesses with turnover below the VAT registration threshold were exempted from the initial phase of MTD.

Following a one-year deferral as a result of the Covid-19 pandemic those VAT registered businesses not previously included will now be required to comply with effect from their first VAT period starting on or after 1 April 2022.

Who will be affected?

VAT registered businesses (including self-employed and landlords) that are not already required to operate MTD under the requirements applying from 1 April 2019 will have to:

  • keep their records digitally (for VAT purposes only)
  • provide their VAT return information to HMRC through MTD compatible software

When will this be effective?

This will be effective from the first VAT return period starting on or after 1 April 2022.

For example if a business is registered for quarterly VAT and the return period runs from 1 June to 31 August, the August quarter end data which is due to be submitted by 7th October 2022 will need to be maintained and submitted digitally to HMRC through compliant software.

Do I need to register?

You will need to subscribe for making tax digital prior to the first mandated return being due otherwise you could be liable to penalties.

What is Digital Record keeping?

All VAT registered businesses must keep and preserve certain records and accounts. Under MTD, some of these records must be kept digitally, within functional compatible software.

Functional compatible software is:

  • a software program or set of software programs
  • a product or set of products
  • an application or set of applications

It must be able to:

  • record and preserve digital records
  • provide HMRC information and returns from data held in those digital records, using the API platform
  • receive information from HMRC, using the API platform

The compatible software needs to store and hold basic information about your business such as your business name, address, VAT number and scheme. It also needs to record details of supplies being made and received including the tax point, value of the supply and VAT rate applied.

Are there any exemptions?

HMRC recognises that a minority of people genuinely cannot use digital tools and those people can write to HMRC to obtain a formal exemption. This minority are those who cannot engage with accounting software or apps for reasons of religion, disability, age or remoteness of location

Businesses that are already exempt from engaging with HMRC through other mandatory digital channels will continue to be exempt and will not have to meet the obligations of MTD.

Are other taxes affected?

Currently MTD only affects VAT, however future MTD phases are planned for income tax for accounting periods beginning on or after 6 April 2023 and for Corporation tax from no earlier than 2026.

We will keep you updated about future changes but get in touch if you need our help.

For more information refer to the government website: https://www.gov.uk/government/publications/extension-of-making-tax-digital-for-vat/extension-of-making-tax-digital-for-vat

 


This article is for general guidance only. It provides an outline, and may not include points which are important to your situation. You should not depend on this blog without taking advice based on the full facts of your case. The information given was correct at the time of publication.

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