Anyone filing VAT returns from April 1, 2022 onwards now has to file their return digitally as HMRC’s Making Tax Digital reaches its next phase.
All businesses registered for VAT – even if they have turnover below the threshold – must file their returns this way from now on. The premise for changing to the MTD regime is to reduce the number of common mistakes made, according to HMRC, and will save taxpayers time when it comes to managing their tax affairs.
However, it is also a key plank of digitising the UK’s tax regime, and MTD is likely to have increased revenue to HMRC thanks to reduced errors in both 2019 and 2020, said HMRC.
Sign up now if you haven’t yet
Nearly 1.6m taxpayers had already joined MTD for VAT as of December 2021, and more than 11m returns have already been submitted this way. Around a third of those businesses with a turnover below the £85,000 VAT threshold signed up before April 1, 2022 and “thousands more are signing up each week”, said HMRC.
Lucy Frazer, Financial Secretary to the Treasury, said: “Businesses using MTD are saving time on their tax affairs, streamlining their processes, and boosting their productivity as a result.
“[This is] our first move towards a modern, digital tax service – MTD makes it easier for businesses to get their tax right first time. There is a range of support and information available for those that need it – including accessible online content such as YouTube videos, GOV.UK help pages and HMRC’s Extra Support service.
“Agents can sign up on behalf of a business, although businesses remain responsible for meeting their VAT obligations. Those who do not join may be charged a penalty for failure to do so.”
Businesses must sign up before they send their next VAT return
Any businesses that have not yet signed up need to before they file their first VAT return after April 1, 2022. There are a number of software options that can be used, including free options for the easiest of calculations, or more advanced for more complex affairs, said HMRC.
A list of software compatible with MTD for VAT is on Gov.UK and there are webinars being run by HMRC for taxpayers who need more help and support on signing up for MTD to make sure they comply.
There are some exemptions
Some VAT-registered businesses can receive exemptions, primarily where it is not reasonable or practical for them to use digital tools for their tax. These include reasons based on age or disability, or a religious objection to using computers. But any other reasonable basis for exemption will be considered by HMRC. You can find more information on whether an exemption may apply on Gov.UK.
While you are waiting for a final decision, continue to file your returns as you usually do.
MTD for income tax 2024
MTD is being extended to 4.2m income taxpayers who are landlords, sole traders and partnerships from 2024. Anyone with business and/or property income over £10,000 will be brought into the regime then. So, it is worth starting to plan ahead with your accountant to make sure this transition is as smooth as possible.
Please get in touch with us to find out how we can help you if you are yet to sign up for MTD. We can help you comply with the new rules.