All VAT-registered businesses are reminded that from 1 April 2022, VAT returns must be submitted digitally, using HMRC-approved Making Tax Digital (MTD) software, regardless of turnover.
MTD is a UK Government strategy aimed at ensuring every business submits tax and VAT records digitally, using software to ensure what they term ‘a digital journey’. The 10-year initiative, which marks a fundamental change in tax reporting in the UK, has been gradually rolled out since 2019 beginning with VAT, and from April 2022 all VAT-registered businesses with a taxable turnover below £85,000 will also now need to comply with MTD rules for VAT. This is expected to affect over one million more businesses.
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If they have not already done so, businesses must register for MTD no less than seven days before the first MTD VAT Return deadline date.
After some initial teething problems, HMRC claim that MTD has been well received, with a third of VAT-registered businesses with a turnover of less than £85,000 having signed up voluntarily before the end of 2021.
Michael Fotheringham, partner at James Milne Chartered Accountants commented: “This next phase in Making Tax Digital is important as it calls for smaller sized businesses to comply with the new tax rules. As well as ensuring they register in time, businesses with a taxable turnover of less than £85,000 will need to make sure they are able to report their tax and VAT liabilities digitally from April this year. This means choosing, installing and learning how to use HMRC-approved software, and letting go of paper records. An alternative to this may be to outsource their accounting function to specialists, who will have the relevant experience and software to undertake this on their behalf. Ultimately, software will enable businesses to submit a complete digital record of business transactions; the end goal of HMRC.
“MTD for all VAT-registered businesses becomes mandatory for the first full VAT return period after 1 April 2022, so if a business’s VAT quarter ends 30 April 2022, their first MTD VAT return would be for the quarter ended 31 July 2022.
“HMRC plans to roll MTD out across all aspects of taxation, including self-assessment, over the next few years, so it is important that businesses of every size get on board with digital record keeping. 1 April 2022 also marks the beginning of a new points-based penalty system for late reporting, so it is important that businesses get ready for MTD as soon as they can.
“At James Milne, our advisors are experts in MTD and can help businesses transition to the new system. It is expected that MTD will help smaller businesses reduce errors, saving time and money for all concerned.”
For more information contact James Milne at www.jamesmilne.co.uk
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