20 December 2021

Making Tax Digital (“MTD”) was announced by the government back in 2017.

The first stage of MTD was introduced for businesses with a taxable turnover greater than £85,000 with effect from 1 April 2019.  All businesses of this size should now be MTD compliant.

From 1 April 2022 the MTD regime will be extended – from this date all other businesses who are VAT registered will need to comply with the new rules.

In practical terms MTD for VAT will mean that all VAT returns where the VAT period commences on or after 1 April 2022 will need to be submitted electronically to HMRC, via MTD compatible software and you will be required to maintain your back-up records in digital format.  The days of filing VAT returns through Government Gateway and keeping manual records are coming to an end.

So what does this mean for you?

  • For your first VAT period starting after that date, you will need to submit your VAT return via your digital account directly to HMRC.
    • If your VAT quarter ends in March, your first MTD submission will be for the quarter ending 30 June 2022, which needs to be submitted by 7 August 2022.
    • If your VAT quarter normally ends in April, then your first MTD submission will be for the quarter ending 31 July 2022, which needs to be submitted by 7 September 2022, and so on.
  • All of your transactions and business details must be recorded (and stored) digitally on a line-by-line basis.
  • The submission of the VAT return to HMRC must be made by the click of a button through “end to end” software.

What you need to do now:

  • If you already use a computerised accounting system, check if it is MTD compliant.
    • If it is MTD compliant, you won’t need to buy any additional software. Many well-known software providers are already providing MTD compliance as part of their package (although this may be version dependant).
    • If it isn’t MTD compliant or if you aren’t sure, then please discuss this with your software provider now.
  • If your VAT returns are currently prepared using an Excel spreadsheet, you can continue to do this. A “bridging tool” will however be required thereby allowing you to digitally link the Excel spreadsheet to the online submission.
  • If you have a bookkeeper, then please speak to them as soon as possible to confirm they have procedures in place to ensure you are MTD compliant from 1 April 2022.

In summary, if your accounting software isn’t MTD compatible / if you don’t use a computerised accounting system / if you currently prepare VAT returns using Excel - you will need to consider your options and take action now.

There is no “opt out” option for MTD. If you are a VAT registered business you are expected to comply with MTD for VAT, unless you are “digitally excluded” - please refer to HMRC website for further details.

If you need further help or advice to ensure that you will be MTD compliant in advance of the 1 April 2022 deadline, please contact Margaret Goodchild on 01228 530913 or email robert.nordon@doddaccountants.co.uk as soon as possible.