Making Tax Digital deadline approaches for VAT-registered businesses

HM Revenue and Customs (HMRC) has reminded businesses that they will no longer be able to use their existing value added tax (VAT) online account to submit VAT returns from 1 November 2022.

The change is the latest stage of the government's Making Tax Digital (MTD) strategy which aims to transform the tax system, make it more efficient and cut down on the number of errors.

By law, VAT-registered businesses (unless they are exempt) must register for MTD and use compatible software to keep VAT records and file returns.

HMRC has allowed business owners who file quarterly or monthly VAT returns to continue using their existing VAT online account but that ends on 1 November. Firms not using MTD-compatible software risk having to pay a penalty.

The steps to follow are as follows:

1. choose MTD-compatible software.

2. check the permissions in the software to ensure it works with MTD.

3. keep digital records for current and future VAT returns.

4. sign up for MTD and file future VAT returns using MTD-compatible software.

To avoid paying for VAT twice, you should sign up to MTD at least five days after your last non-MTD VAT return deadline date, and no less than seven days before your first MTD VAT return deadline date.

If a business is new and is not yet registered for VAT, they will automatically be signed up for MTD while registering for VAT through HMRC's VAT Registration Service (VRS).

Richard Fuller MP, economic secretary to the Treasury, said:

"Making Tax Digital can help businesses get their tax right first time, which cuts the administration burden and frees up time for them to get on with what matters most to them – growing their business.

"I encourage any VAT-registered businesses still to register for Making Tax Digital to get online and sign up."

Making Tax Digital for income tax self-assessment

The next change through MTD comes into force on 6 April 2024 when unincorporated businesses and landlords with total business or property income above £10,000 a year will need to comply with MTD for income tax self-assessment (MTD for ITSA).

They will have to keep digital records and use compatible software to submit quarterly updates to the government.

The rules were originally meant to be introduced in April 2023 but the government announced a delay due to the disruption caused by the coronavirus pandemic.

Relevant Making Tax Digital resources

Making Tax Digital for VAT: How to register

Webinar: Prepare your new business for Making Tax Digital

How to pay VAT – a guide for small business owners

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