Ready for the next phase of MTD?

Making Tax Digital or MTD is part of the UK government’s long term strategy to become the most digitally advanced tax administration in the world. MTD for VAT was first introduced in April 2019. This meant that all VAT registered businesses with a taxable turnover exceeding £85,000 were affected.

From April 2022, MTD for VAT has been extended to all VAT registered businesses.

So what does that mean? 

From April 2022, all VAT registered businesses will need to keep their VAT records digitally, and submit their VAT return information to HMRC through MTD compatible software.

The MTD rules will apply to the first VAT return that starts on or after 1st April 2022.

• If you have a January - March VAT period, your first MTD submission will be for the period April - June

• If you have a February - April VAT period your first MTD submission will be May - July and lastly,

• If you have a March - May VAT period your first MTD submission will be June - August.

So these will be your first MTD VAT periods.

It’s important to remember that VAT periods and submission and payment deadlines won’t change with MTD so you can carry on submitting and paying when you usually would.

Under MTD rules some records must be kept digitally in functional compatible software.

Digital records mean Business name, Address, VAT reg number & VAT accounting scheme. Also information about supplies made and received, time, value of supply, and VAT rate applicable.

The records that a business is required to keep hasn’t really changed with MTD, what has changed is where the records must be stored.

The VAT return can no longer be submitted through the HMRC gateway and business owners will need to register their business for MTD and use compatible software to file their returns.

You can apply for an exemption if it’s not reasonable or practical for you to use computers, software or the internet to follow the rules for MTD for VAT. To apply for an exemption a business needs to call or write to HMRC and they’ll consider each application on a case by case basis.

If you need help registering your business for MTD or help to set up your software please contact us. We use Xero accounting software, designed for small businesses with HMRC recognised Making Tax Digital software.

Check out these really helpful short videos Xero has produced.