Making Tax Digital (MTD) is a long-held Government ambition to create an online tax filing and payment system. It also hopes to stimulate a migration to digital record keeping. Long-term, it's intended all business taxes will be part of MTD. From 1 April 2022 all VAT registered businesses must follow its rules regardless of turnover.
22 July 2020
Background and the current situation
The Government's Making Tax Digital Programme launched in April 2019 with its first scheme – Making Tax Digital for VAT. To aid a smooth adoption, the Government introduced a gradual phasing in of eligible businesses. Compliance with Making Tax Digital for VAT requires a business to keep digital records and use MTD-compliant software to file their VAT returns.
Currently all VAT registered business with a taxable turnover above £85,000, must follow the rules for Making Tax Digital for VAT unless:
- the business uses the VAT GIANT service – in which case HMRC will contact them to instruct when their deadline is
- the business applies for an exemption
Businesses currently exempt are those:
- whose taxable turnover has not been above £85,000 since April 2019
- who are exempt from filing VAT Returns online
- where the directors or the business are subject to an insolvency procedure
Further exemptions are considered by HMRC on a case by case basis if it is not reasonable or practical for the business to use computers, software or the internet to follow the rules for Making Tax Digital for VAT. This could be because:
- age, a disability or where you live
- you object to using computers on religious grounds
- of any other reason why it’s not reasonable or practical
All change from 1 April 2022
In a recent announcement, the Government has said from 1 April 2022 all VAT registered businesses must follow these rules regardless of turnover. This means that if a business' taxable turnover is below the VAT threshold of £85,000 it should keep digital records from its first VAT return period that starts on or after 1 April 2022.
Businesses can sign up to MTD for VAT any time in the run up to 1 April 2022. It will however be mandatory for them to have signed up before their first VAT return period that starts on or after 1 April 2022. See more information here.
Can we help?
Our specialist VAT team have helped many businesses migrate to digital record keeping and comply with Making Tax Digital for VAT. If you have questions or need help getting your business ready, please do contact them at email: firstname.lastname@example.org or call one of the Shipleys' offices.
Specific advice should be obtained before taking action, or refraining from taking action, in relation to this summary, if you would like advice or further information, please speak to your usual Shipleys contact.
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