Businesses urged to prepare for Making Tax Digital for VAT
)
Posted: Thu 13th Jan 2022
The government has reminded businesses that all those registered for VAT must comply with new Making Tax Digital rules from this April.
Since 2019, most VAT-registered taxpayers with a turnover above the VAT threshold of £85,000 have needed to keep their VAT records digitally and update HM Revenue & Customs (HMRC) through secure software. From 1 April, all VAT registered businesses, regardless of turnover, must do the same.
The requirement is part of the government's Making Tax Digital (MTD) strategy which aims to transform the tax system. The government says the changes increase business productivity, reduce mistakes and cut costs. Figures show that tax return mistakes cost the exchequer £8.5bn in 2018-19.
To sign up to Making Tax Digital for VAT, businesses, or an agent acting on a businesses’ behalf, must:
keep digital records starting from 1 April 2022 or the beginning of their VAT period
sign up and submit their VAT return through Making Tax Digital
HMRC's Joanna Rowland said:
"Making Tax Digital is fundamental to the delivery of a trusted and modern tax system, making it easier for businesses to get their tax right and supporting the UK to go digital.
"By signing up for Making Tax Digital, we expect most businesses to experience long-term benefits, including reduced errors and time saved in managing their tax affairs.
"We encourage businesses to explore digital record-keeping for their VAT affairs and use this time to choose the right software to support their business needs."
The government says that as of December 2021, 1.6m taxpayers had joined Making Tax Digital for VAT with more than 11m returns had been successfully submitted. Around a third of VAT-registered businesses with taxable turnover below £85,000 have signed up to Making Tax Digital for VAT ahead it becoming mandatory on 1 April.
The Making Tax Digital for VAT changes are among several new rules and regulations businesses need to be aware of in 2022.
Following the VAT changes, income tax self assessment will also be covered by Making Tax Digital. Those changes were originally due to come into force in April 2023 but the government announced last September that because of the coronavirus pandemic, businesses and landlords with an income of over £10,000 will now be mandated to comply from April 2024. The rules will apply to general partnerships from April 2025.
Useful Making Tax Digital resources
You might also like…
