Making Tax Digital (MTD) is now mandatory for VAT-registered businesses, this was implemented on 1 April 2022.
MTD is a key part of the overall digitalisation of UK tax and helps taxpayers get their tax returns right by reducing common mistakes as well as saving time managing their tax affairs.
Evidence shows MTD is succeeding in its central aims of reducing errors, while also making it faster to prepare and submit returns, and boosting productivity for businesses.
VAT-registered businesses that have not yet signed up to MTD for VAT should do so now. All VAT-registered businesses must use MTD for VAT for their first VAT return starting on or after 1 April 2022.
Getting Started With MTD Software
Businesses should choose the software that is right for them, whether that is one of the simple free options available or a more advanced product for those with complex affairs. A list of software compatible with MTD for VAT, including free and low-cost options, can be found on GOV.UK.
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.
There is a range of compatible software products available for MTD for VAT, allowing businesses to choose which tools they use to run their business and tax affairs. A list of software compatible with MTD for VAT, including free and low-cost options, can be found on GOV.UK.
Some VAT-registered businesses may be eligible for an exemption from MTD if it is not reasonable or practical for them to use digital tools for their tax. If a business has previously been granted an exemption for VAT online filing, this will carry over to MTD VAT requirements. Go to GOV.UK for more information on whether an exemption may apply.
Businesses must keep digital records through MTD. This can be done via software. Where a business chooses to use bridging software digital links must be in place to ensure that records are kept digitally as information is transferred between different platforms.
(a type of recognised MTD compatible software which extracts information from a business’s spreadsheet and then submits it to HMRC in a way which is compliant with MTD requirements)
MTD Steps and Further Information
Businesses can choose to register themselves for MTD or can ask their agent to do this for them.
Businesses, or an agent on their behalf, must sign up to MTD for VAT via GOV.UK to fully join MTD. They must have MTD-compatible software before signing up.
Businesses should ensure that they sign up to MTD at least 5 days after their last non-MTD VAT return deadline date, and no less than 7 days before their first MTD VAT return deadline date to avoid paying for their VAT twice.
Businesses need to have signed up to MTD for their first VAT return starting on or after 1 April 2022. They may not be required to make their first submission via MTD until Summer 2022.