VAT registered businesses are required to report Value Added Tax details digitally starting on 1 April 2022. Now, for the first time, businesses that are below the UK VAT registration threshold of £85,000 but have opted to voluntarily register for VAT will be subject to MTD for VAT requirements.
HMRC will require affected businesses to register for MTD returns at least five days after their last VAT return deadline and no less than seven days before their first MTD deadline. As a result, many hundreds of thousands of micro-businesses will have to invest in accounting software or API-enabled bridging spreadsheets for the first time, or at the very least upgrade, to comply with the requirement to have an uninterrupted digital journey from invoice to VAT return. Manual bookkeeping and data manipulation are not permitted.
MTD for VAT is the first stage of digitising tax reporting in the UK and will be rolled out to other taxes in the coming years, including Income Tax in April 2024.
MTD for VAT Roll out
MTD for VAT was rolled out by HMRC in three stages:
- April 2019 – mandated VAT registered business to file their regular return via the new API portal
- April 2021 – digital bookkeeping and digital links requirements introduced. At the same time, MTD for VAT requirements became subject to regular VAT penalty regime. This measure was originally scheduled for April 2020, but was delayed due to the COVID-19 pandemic.
- April 2022 – all voluntarily VAT registered business below the VAT registration threshold of £85,000 must also comply with the above requirements.
Businesses that are VAT-registered may be exempt from Making Tax Digital if it is not reasonable or practicable for them to use digital tools to do their taxes. If a business has previously been granted an exemption for filing VAT online, this will also apply to Making Tax Digital’s VAT requirements.
Find out more about MTD at UK-Accountant at our VAT COMPLIANCE HUB