Extension of Making Tax Digital (MTD) to All UK VAT Registered Businesses

As advised in our blog of 25 February 2021,  ALL VAT registered businesses with turnover below the VAT threshold (currently £85,000) will need to report their VAT through Making Tax Digital (MTD) from 01 April 2022.  Currently, only businesses who have a taxable turnover above £85,000 are required to submit their VAT returns through MTD compliant software.

So what is required?

For your first VAT return beginning on, or after, 01 April 2022, you will need to keep your records digitally using functional compatible software. This means using:-

• software that is able to record and store the data and also submit the VAT return to HMRC using their MTD API or

• software that is able to record and store the data and can export it to third party bridging software to submit the VAT return to HMRC using their MTD API.

It is therefore worth considering your options well in advance to ensure you will be MTD compliant and ready to submit your returns on the usual deadlines. There are several options available, such as:

• updating your current software to the latest version to ensure MTD compatibility, if this is possible

• changing accounting software to an MTD compliant system.  This could be a cloud-based package such as Xero or QuickBooks.  Cloud packages are automatically updated to the latest version of the software and will always be up to date.

• using third-party bridging software, such as the Johnston Smillie MTD for VAT Filer to submit the VAT returns

https://jsca.co.uk/making-tax-digital-mtd-excel-bridging-software/

You will also need to sign up for MTD before the first VAT return for the period starting on, or after, 01 April 2022 is due for submission.

Payment of VAT by Direct Debit under MTD

• If you do not currently pay your VAT by Direct Debit and wish to do so, you should sign up  for this at least 72 hours before the VAT return is due for submission.  This means if your first VAT return is due for submission on 07 August 2022, you should sign up by 04 August 2022 at the latest.

• If you already pay by Direct Debit, HMRC will automatically move the existing Direct Debit over to the new system to ensure there is no interruption to this

https://www.gov.uk/vat-record-keeping/making-tax-digital-for-vat

https://www.gov.uk/guidance/find-software-thats-compatible-with-making-tax-digital-for-vat

https://www.gov.uk/pay-vat/direct-debit

The information in this blog provides only an overview of HMRC guidance and legislation in force at the date of publication and no action should be taken without consulting the detailed HMRC guidance and legislation or seeking professional advice.  Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this blog can be accepted by the firm.

Photo by Christian Wiediger on Unsplash