Making Tax Digital for VAT – What you need to know
26/01/2022
The next few years will see several significant changes to taxation, including the further expansion of Making Tax Digital (MTD) for VAT in April this year.
What is Making Tax Digital?
MTD is HMRC’s plan to digitise the tax system. VAT is the first tax to be subject to requirements to keep digital records and make digital returns using HMRC-compatible software.
HMRC plans to extend MTD requirements to other taxes in the coming years.
Isn’t MTD for VAT already underway for some businesses?
Businesses above the £85,000 registration threshold have had to comply since April 2019. They had an initial soft-landing period which ended in 2020 – new businesses no longer get this.
What is changing in April? And what will it mean for me?
From April 2022, the regime is extended to all VAT registered organisations, including those below the threshold that voluntarily registered.
If you are VAT registered but turn over less than the £85,000 threshold, you will have to follow the same rules that organisations currently within the regime follow, including using HMRC-compliant software to report and record VAT information for each VAT filing period.
How can I prepare for this?
You will need to put systems in place that can report and record information, for each VAT filing period, within the rules set out by HMRC. The software must be able to:
- Keep digital records
- Submit VAT returns to HMRC based on those records
- Receive information from HMRC
All the leading cloud accounting platforms are MTD for VAT-compatible.
You must continue to submit this information each quarter and produce an annual return.
Contact us today to find out more about how the latest cloud accounting software can help you.