Making tax digital – April 2022 – What you need to know

  • 20th August 2021

Since 2019, VAT-registered businesses with a turnover above the VAT registration threshold of £85,000 have needed to keep their records digitally and provide their VAT return information to HMRC through MTD-compatible software.

Those VAT-registered businesses with turnover below the VAT registration threshold were exempted from the initial phase MTD.

Following a one year deferral (a result of the Covid-19 pandemic) those VAT registered businesses not previously included will be required to comply with effect from their first VAT period starting on or after 1 April 2022. Read the Government guidance here.

Does it affect me?

VAT registered businesses (including self-employed and landlords) that are not already required to operate MTD under the requirements applying from 1 April 2019 will have to:

  • keep their records digitally (for VAT purposes only)
  • provide their VAT return information to HMRC through Making Tax Digital compatible software

This will be effective from your first VAT return period starting on or after 1 April 2022. For example if you are registered for quarterly VAT and that period runs from 1 June to 31 August your August quarter end data which is due to be submitted by 7th October 2022 will need to be maintained and submitted digitally through compliant software to HMRC.

Do I need to register?

You will need to subscribe for making tax digital prior to the first mandated return being due in order to avoid penalties. https://www.gov.uk/vat-record-keeping/sign-up-for-making-tax-digital-for-vat

What does Digital Record keeping mean?

All VAT registered businesses must keep and preserve certain records and accounts. Under Making Tax Digital, some of these records must be kept digitally, within functional compatible software.

Functional compatible software is:

  • a software program or set of software programs
  • a product or set of products
  • an application or set of applications

It must be able to:

  • record and preserve digital records
  • provide HMRC information and returns from data held in those digital records, using the API platform
  • receive information from HMRC, using the API platform

The compatible software needs to store and hold basic information about your business such as your business name, address, VAT number and scheme. It also needs to record details of supplies being made and received including the tax point, value of the supply and VAT rate applied.

General VAT record keeping guidance can be found here: https://www.gov.uk/vat-record-keeping/making-tax-digital-for-vat

Are there any exemptions?

People with certain disabilities, those in rural locations with poor broadband services, and those who are digitally excluded for other reasons such as religion may find it more difficult to comply. You may need to write to HMRC to obtain a formal exemption.

Businesses that are already exempt from engaging with HMRC through other mandatory digital channels will continue to be exempt and will not have to meet the obligations of MTD.

Does this affect other taxes?

Currently MTD only affects VAT, however future making tax digital phases are planned for income tax for accounting periods beginning on or after 6 April 2023 and for Corporation tax from no earlier than 2026.

We will keep our clients and contacts up to date when more information is released about these future changes.

Where can I find out more?

As we did when this was first introduced, we will be running MTD events in the 6 month countdown which covers off more detail. Keep an eye on our events page and social media for more details when the events are released.

HMRC’s MTD Hub: https://www.gov.uk/government/collections/making-tax-digital-for-vat

For those who already use online accountancy software such as Quickbooks, Xero or Sage, further information in relation to registering is available.

Quickbooks

Xero

Sage


All data and figures referred to in our news section are correct at the date of publishing and should not be relied upon as still current.