Get prepared for the new Making Tax Digital (MTD) changes
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How is Making Tax Digital (MTD) changing from April 1, 2022?
From April 1, 2022, all remaining VAT registered businesses, mainly those below the £85,000 threshold, not already operating MTD under the current legislation, will have to:
- Sign-up to MTD
- Keep their records digitally (for VAT purposes only)
- Submit their VAT return information to HMRC through MTD compatible software
Please note: If your business has been granted an exemption, this will still apply beyond 1 April 2022. If you have not applied for an exemption and believe you may be eligible, you may still be able to apply.
What are the exemptions from MTD Online Filing?
Some VAT-registered businesses may be eligible for an exemption from MTD if it is not reasonable or practicable for a business to use digital tools for their tax.
HMRC has stated that cost alone will not be an acceptable reason for an extension to be granted under MTD for VAT changes from April 2022.
Guidance on how to apply for an exemption can be found here.
What are the MTD software options?
It is beneficial to begin researching software if you haven’t already. You can find a list of software for MTD for VAT here.
The software you choose should seamlessly pull information from businesses’ digital records to submit returns, saving time that can be better spent running your business.
MTD software can ultimately improve your cash flow by helping optimise your processes and influence wider digitalisation.
Although every organisation has specific requirements, businesses should ensure the software they choose ticks the following boxes:
- Automatically calculates the tax you owe (including VAT and payroll tax)
- Pulls transaction data straight from the bank, invoicing software, or POS system
- Updates transactions every day, allowing firms to stay on top of bank reconciliations
- Creates digital records of paper receipts by photographing them with an individual’s mobile
How to sign up for MTD VAT?
To sign up to MTD VAT you need to:
- Visit gov.uk and choose MTD-compatible software here
- Keep digital records starting from 1 April 2022 or the beginning of their VAT period
- Sign up and submit their VAT return through MTD