If you are a VAT-registered business and haven’t signed up for Making Tax Digital for VAT (MTD VAT) yet, then, we don’t want to alarm you, but you have less than a month to go!
And if you’re thinking it doesn’t affect your business because your taxable turnover is below the VAT registration threshold (currently, £85,000), think again as the changes affects all VAT-registered companies.
We take a look at what MTD for VAT means for your business and what you need to do to get ready for 1 April 2022.
What is MTD for VAT?
MTD for VAT is part of the government’s 10-year strategy to make it easier for individuals and businesses to manage their financial affairs and get their tax right by using a digital tax system.
MTD for VAT means you can no longer submit VAT returns via the HMRC website, but will need to use MTD-compatible software to:
- Keep and maintain your VAT records for at least six years
- Create VAT returns
- Send VAT returns to HMRC.
Who does it affect?
Originally rolled-out in 2019, MTD for VAT was initially for VAT-registered companies with income over £85,000. By December 2021, nearly 1.6million taxpayers had registered.
From 1 April 2022, every VAT-registered company must sign up for MTD for VAT even if their turnover is less than £85,000. This also applies to companies if they have signed up for VAT voluntarily.
Around a third of businesses, have already signed up, but if you haven’t done it yet, it’s a legal requirement that you do so by 1 April 2022.
Are any businesses exempt?
If it’s not reasonable or practical for a VAT-registered business to use digital software to file their returns, then they may be eligible for an exemption.
So, if you’ve already been granted an exemption for VAT online filing, this will carry over to MTD for VAT.
What do the new rules mean?
From the first VAT period starting on or after 1 April 2022 you must submit your VAT returns through MTD and keep digital records, which cover:
• Your business name
• Address of your principal place of business
• Your VAT registration number
• Details of any VAT accounting schemes you use
• Records of each invoice, including time and dates, net value (excluding VAT) and VAT rate used.
Depending on what VAT scheme you use, you may be required to keep more or less information. If you’re not sure, please get in touch, and we’ll be happy to advise you.
If your taxable turnover drops below the VAT threshold before 1 April 2022, you will still need to keep digital records and submit your VAT returns using MTD-compatible software.
Do I have to file VAT returns more often?
No. VAT returns can still be completed monthly, quarterly or annually and any payments due will still be on the current payment dates.
You also won’t have to keep any additional records for VAT purposes. You just need to ensure you keep digital records and submit MTD VAT returns. So, if you do write or print invoices or receipts, just remember you will need to transfer the VAT information to your accounting software.
What should I do next?
If you haven’t yet signed up for MTD for VAT, then we suggest you do it as soon as possible.
1. Make sure you are using MTD-compatible software. If you’re not sure, take a look at this useful link or give us a call and we will be happy help.
2. Sign up for MTD
3. Start keeping digital records from 1 April 2022
4. Login and submit your VAT return to HMRC using MTD compatible software.
Bear in mind that even if you register today, your first submission may not happen until summer 2022, and remember if you don’t sign up you will be charged a penalty.
If you don’t want to manage your VAT returns yourself, we are more than happy to do it on your behalf. Find out more about our VAT services.
Don’t let MTD for VAT stress you out
MTD for VAT is all about making life easier and ensuring less tax mistakes happen, but like any new system getting used to it can be stressful. That’s where we come in. As well as explaining how things work in as simple a way as possible, we are more than happy to help you as little or as much as you want. Get in touch today to find out more.