Making Tax Digital (MTD) for VAT – the next stage
MTD is due to be extended to all VAT registered businesses in respect of VAT periods beginning on or after 1 April 2022. Until now only businesses that must be registered for VAT, because their turnover is above the registration threshold, have had to keep digital records and file their returns via MTD. Businesses that are registered voluntarily have always been able to join MTD but it was not compulsory.
The introduction of MTD applies to the VAT periods beginning on or after 1 April and so when you must start to use MTD depends on when you submit your returns. For example, a business that submits returns for quarters ended 31 March, 30 June, 30 September and 31 December must keep digital records from 1 April 2022 but for a business that submits returns for quarters ended 30 April, 31 July, 31 October and 31 January it has to keep digital records from 1 May 2022. Businesses submitting monthly VAT returns must use MTD from 1 April 2022.
Digital records
All VAT registered businesses must keep digital records for VAT periods beginning on or after 1 April 2022. MTD-compliant software may be used to keep records or records can be kept on spreadsheets. If using spreadsheets you need to make sure that all the required information is held on the spreadsheets.
VAT returns
VAT returns for VAT periods beginning on or after 1 April 2022 must be filed via MTD-compliant software.
If you are using spreadsheets you will need some software that will take the data from the spreadsheet and submit it electronically.
Joining MTD
You must apply to join MTD, you will not be automatically transferred. Once you join MTD you cannot use the HMRC portal to submit VAT returns, any figures entered on the portal will not be received by HMRC. You must submit all future VAT returns by MTD
This means that you must be ready to submit all VAT returns by MTD before you apply. If you are ready to join MTD you may have to delay the application slightly if you need to submit the last return prepared pre-MTD via the HMRC portal. However, you should still be keeping digital records from the correct date.
If you pay your VAT by direct debit you must apply to join MTD at least 7 working days before the due date of the first MTD return, or at least 5 working days after. In other cases you must apply at least 3 working days before the due date of the first MTD return.
If you would prefer your accountant to submit the VAT returns on your behalf you need to discuss this with your accountant well before the first MTD return is due.
Exemption from MTD
You can claim exemption from MTD if you are not able to use the internet or computers due to age, disability or location, or if there are other reasons that make use of MTD impractical. You may also claim exemption on religious grounds.
You must claim an exemption from HMRC and HMRC must agree to the exemption – it is not automatic.
Cancelling registration
You may wish to deregister from VAT – please be aware of the consequences of deregistration.
If you are not sure what to do or how you are affected please seek advice.