Making Tax Digital is coming, are you ready?
In an effort to improve the tax administration process and make it easier for businesses to manage their tax affairs, HMRC introduced the Making Tax Digital (MTD) initiative.
Already in place for businesses with a turnover of more than £85,000, MTD will be mandatory for all VAT registered organisations irrespective of the level of taxable turnover from 1 April.
This means that businesses who are registered for VAT on a voluntary basis (turnover below £85,000) will also be required to comply with MTD requirements.
If you own a business that falls into this category, you now need to keep your VAT records in a digital format using accounting software that meets HMRCs MTD criteria.
You will no longer be able to submit your VAT returns via the HMRC portal, so you should consider setting up compatible software such as Xero, Sage or QuickBooks to ensure that VAT returns are calculated and submitted directly to HMRC.
If you currently keep manual records, you must seek a digital solution, and if you use spreadsheets to keep your accounting records, you will need to obtain bridging software to allow you to submit your VAT return directly to HMRC.
The new rules come into effect for VAT return periods starting on or after 1 April 2022. So, for example, if your VAT returns are prepared for calendar quarters, the period that runs from 1 April 2022 to 30 June 2022, which is due for submission by 7 August, will be the first return that needs submitting digitally to HMRC through compliant software.
If you wish to remain VAT registered, you’ll need to follow the MTD for VAT rules for all VAT periods that fall on or after 1 April 2022.
If you’d like any help with the compliance process and assistance with any queries, our Indirect Tax team are happy to help. Get in touch at VAT@bhp.co.uk.