Who will be affected?
Under previous guidelines, only businesses whose taxable turnover met or exceeded the VAT registration threshold were required to register for Making Tax Digital (MTD). However, HMRC have extended requirements to smaller VAT business which will come into force from the first full VAT period starting on or after 1st April 2022.
What will the new guidelines mean and how will the system work?
The extension of the guidelines means that all businesses that submit VAT returns must sign up for MTD via the HMRC website.
From their VAT period starting on or after 1st April 2022, VAT registered businesses (including self-employed and landlords) that are not already required to operate MTD under the requirements applying from 1st April 2019, will be required to:
- Keep digital VAT records. Once you have signed up for MTD, it’s then crucial that you transfer any manual records into a digital format. More information on the records that must be kept digitally can be found here: https://www.gov.uk/vat-record-keeping/making-tax-digital-for-vat
- File their VAT returns to HMRC using an approved, compatible software package, (e.g Xero), or use ‘bridging’ software to support the submission of data digitally from an excel spreadsheet (e.g IRIS VAT filer).
What is the aim of the policy?
Making Tax Digital is a major government initiative that aims to make it easier for people and businesses to “get their tax right” and “stay on top of their tax affairs”.
Once the VAT system has been digitalised, HMRC will turn its attention to introducing Making Tax Digital for Income Tax Self Assessment (MTD ITSA) which it expects to come online in April 2024. Accordingly, putting robust digitalized systems/software in place now could save time later down the line.
HB&O has it’s own in-house VAT department who can assist with any of your VAT-related queries and can support you as guidance changes and requirements alter.
If you’d like to speak to one of our VAT specialists and get some assistance, please leave us with your name and contact details via the link below and we’ll be in touch.