Making Tax Digital (MTD) for VAT is now mandatory for all VAT registered businesses for VAT return periods starting on or after 1 April 2022, regardless of annual turnover. These changes are building on the introduction of MTD for VAT in April 2019 whereby these rules applied to VAT registered businesses with taxable turnover above the VAT threshold.
Although these changes are effective from 1 April 2022, you may not be required to make your first submission via MTD until the summer of 2022. For example, if your business has VAT quarter ends of 31 March, 30 June, 30 September and 31 December 2022, your first VAT Return that needs to be submitted under MTD will be the quarter ended 30 June 2022; this is the first full VAT quarter commencing on or after 1 April 2022.
Digital Record Keeping and MTD Compatible Software
As a result of MTD, VAT registered businesses will be required to maintain digital records of their VAT data and submit VAT Returns to HMRC via MTD compatible software.
VAT Returns can no longer be submitted through your HMRC Business Tax Account, and they must be submitted using MTD compatible software. Cloud based accountancy packages such as Xero, FreeAgent and Sage meet HMRC’s MTD VAT requirements, as do the use of spreadsheets coupled with bridging software.
Exemption from MTD Online Filing and Penalties for Non-Compliance
Exemptions from MTD are available for businesses if you can show that it is not reasonable or practical to comply with MTD rules and typically this could be because of age, disability, location or religion.
Applications will be reviewed on a case-by-case basis and must be submitted to HMRC with detailed reasoning for the exemption request. HMRC have stated that cost alone will not be an acceptable reason for an exemption.
HMRC do have the powers to issues penalties to businesses who do not comply with MTD for VAT.
If you have any queries or would like a free initial meeting to discuss how we could help you, please call us on 01284 701271 or email the writer of this article at [email protected]
