From 1st April 2022, all VAT-registered businesses must comply with Making Tax Digital (MTD), regardless of their turnover. Up till then, businesses under the VAT threshold (meaning sales turnover of less than £85,000 per year) haven’t needed to comply with Making Tax Digital rules. 

 

Included under MTD are the following business types: sole traders, partnerships, limited companies, landlords with at least one property in the UK, registered charities and trusts. 

 

Once a business is signed up for MTD, you can only submit MTD VAT returns which differs to the previous method. More to follow on this… 

 

Making Tax Digital is a government initiative requiring businesses to digitise the management of their taxes. VAT-registered businesses need to keep digital records and submit their VAT returns using software that is compatible with and recognised by HMRC. 

 

The remainder of the VAT requirements haven’t changed: businesses are still required to complete returns monthly, quarterly, or annually (depending on what has been selected during registration); VAT payments are still due on the current deadlines; and you don’t need to keep additional records for VAT purposes. 

 

There are many benefits to MTD, including the following:

You don’t need to keep additional records for VAT, but the records (invoice and receipt data) you keep must be digital and should include the following details:

All your records must be kept digitally, which means you must use either a spreadsheet or accounting software. You can use a mix but any information shared between them must be shared with digital links. Similarly, any information shared between you and your accountant must be shared digitally. Copying and pasting from a spreadsheet will not be accepted for MTD. You must ensure you hold digital or physical copies of your invoices to confirm the numbers in your spreadsheet. 

 

Xero and FreeAgent both offer HMRC-compatible software solutions that enables you to remain compliant in storing your records digitally.

 

With Making Tax Digital, VAT-registered business owners will no longer submit their VAT returns directly through the HMRC website. Instead, you’ll have to access compatible software that includes an MTD for VAT feature, like Xero or FreeAgent. That software will then be used to submit your returns. 

 

You can sign up for MTD for VAT using the gov.uk website. In order to register, you’ll need the following details to hand:

If you have questions about registering for MTD for VAT, we can help. We register our clients and can help you with this but you will need to authorise us. Please contact us to get this process started.

 

Individual businesses will need the following in addition:

Both Xero and FreeAgent software solutions enable you to store your records digitally and submit your VAT returns to HMRC directly. They also have other features to make managing your business easier, including the following:

 

Get in touch with us to get started with Making Tax Digital.