MTD for VAT legislation from 1 April 2022 – are you affected?

Laura Carter

Laura Carter

Early Careers Senior Manager

Making Tax Digital (MTD) is a vital component of the Government’s plan to make it easier for individuals and businesses to get their tax right and keep on top of their affairs through a fully digital tax system. From 1 April 2019 MTD compliance became mandatory for most VAT registered businesses with a taxable turnover above the current threshold (£85,000), and the next phase of MTD for VAT is coming into force on 1 April 2022.

What is changing?

From the first VAT period starting on or after 1 April 2022, all remaining VAT registered businesses, mainly those below the £85,000 threshold, not already operating MTD under the current legislation, will have to:

  • Sign-up to MTD
  • Keep their records digitally (for VAT purposes only)
  • Submit their VAT return information to HMRC through MTD compatible software

If your business has already been granted an exemption to MTD, this will still apply beyond 1 April 2022. If you have not already applied for an exemption and think you may be eligible, you may still be able to apply, although the conditions are narrow. Guidance on how to apply for an exemption can be found here.

What do I need to do?

If you’re not already using a compliant digital software solution, now is the time to look at your options. More information on the digital records you must keep and what constitutes MTD-compliant software can be found in HMRC Notice 700/22.

Embracing digital might sound like a time-consuming and expensive process, but for most businesses, the transition is not as complex or costly as it seems. We’ve been helping businesses of all sizes prepare for MTD for some time now and have a range of innovative solutions to suit your business needs, from cloud accounting packages like Xero, to Excel solutions that link to bridging software to file your VAT return.

The benefits of digital

The digital software required for MTD makes reporting and submitting information to HMRC a much more straightforward and less stressful process, and there are a myriad of other benefits to going digital too.

Your accounting software can link with your bank account, and most ‘paperwork’ can be filed electronically and transferred efficiently into your software, meaning less manual data entry is required. As well as freeing up valuable time, this reduces the risk of processing errors, so your records will be more accurate.

Digital software can also provide you with real-time management information so you can quickly and easily see how your business is performing, measure against your objectives, and produce up-to-date cash flow forecasts and budgets. With this increased visibility of your business performance at your fingertips, and a much-reduced administrative burden, you can focus on growing your business and making it more productive, efficient, and profitable.

Get in touch

We recommend all affected businesses start their MTD planning as soon as possible to give you enough time to implement, train and become comfortable with the new digital systems. We are here to support you in your digital journey. If you’re not sure where to start, please get in touch with me, another member of our Business Advisory team or your usual Johnston Carmichael contact to arrange an initial chat.

Alternatively, you can register for our free webinar 'Making Tax Digital (MTD) for VAT: Deadline, Details and your Digital Journey' held on February 22nd at 10am by just clicking here

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