From 1 April 2022, all VAT registered businesses will be required to register for Making Tax Digital (MTD) and to maintain digital records.
The first wave of MTD commenced in April 2019, it required all businesses with an annual turnover above the VAT threshold to register for MTD. For VAT returns commencing on or after 1 April 2022 MTD registration will be mandatory for all VAT registered businesses, irrespective of their annual turnover.
Digital record keeping
All VAT registered businesses must keep and maintain specific business records. Records used to compile your VAT return figures can no longer be maintained manually i.e., using a manual daybook system. Making Tax Digital requires these records to be kept digitally, within functional compatible software.
Functional compatible software includes:
- Cloud based accounting packages such as Xero, QuickBooks and Sage
- Spreadsheets used in conjunction with bridging software
The use of spreadsheets, coupled with bridging software, has been a popular choice for smaller businesses who are not yet ready to take the leap to dedicated accounting software. Spreadsheets are widely available, and bridging software is a simple, cost-effective, and compliant way to submit VAT returns to HMRC.
If a desktop accounting package is currently used, it may need to be updated to a cloud-based package. Alternatively, a bridging solution can be used to submit VAT returns.
Submitting VAT returns under MTD
VAT returns cannot be submitted through your HMRC Business Tax Account, they must be submitted using functional compatible software.
Exemption from MTD
Exemptions are available if businesses can show that it is not reasonable or practical to use computers, software, or the internet to comply with MTD rules. Although not an exhaustive list, it could be due to:
- Age/computer literacy
- Disability
- Location- No/limited Internet access
- religious beliefs.
VAT registrations will not be granted an exemption solely based on extra effort, time or cost.
Applications for exemption must be submitted to HMRC with detailed reasoning for the exemption request.
Businesses already exempt from submitting VAT returns online will not have to comply with MTD.
Penalties for non-compliance
HMRC have powers to issue penalties to VAT registrations not complying with the digital records requirements, digital links requirements, or for not signing up to MTD within the correct timeframe.
How can we help?
MHA MacIntyre Hudson can assist by:
- Advising on the options available for digital record keeping and the best solution for your business including software set up and training, if required.
- Reviewing your accounting records to ensure you will be compliant from 1st April 2022
- Completing VAT return submissions on your behalf using our bridging solution
- Advising on exemption from MTD, and applying to HMRC on your behalf if applicable.
Get in touch with our Making Tax Digital specilaists today by completing our online enquiry form
