Making Tax Digital (MTD) for VAT will be extended to almost all businesses from next year, firms have been reminded.
The notice comes after HM Revenue & Customs (HMRC) wrote to thousands of businesses who have yet to transition to the new digital tax regime.
If you are registered for VAT, here’s what you need to know.
What is Making Tax Digital for VAT?
Under the new digital tax system, VAT-registered businesses with a turnover above the VAT registration threshold are required to keep their records digitally and provide their VAT return information to HMRC through MTD-compatible software.
Under current legislation, only VAT-registered businesses with a taxable turnover above the VAT threshold (currently £85,000) are required to comply with the new rules, such as keeping digital records and submitting tax returns using MTD-compliant software.
But from April 2022, MTD for VAT will be extended to all businesses (except those with a digital tax exclusion), regardless of income.
What do I need to do?
With less than five months to go, VAT-registered businesses should start preparing for the transition to digital tax as soon as possible.
This may include:
- Reading up on MTD for VAT. The official guidance and full details of the regime can be found here.
- Migrating to cloud-based storage. Cloud storage will help your team complete digital VAT returns and improve collaboration across departments.
- Exploring MTD-compliant software. It is not good enough to simply submit a digital document to HMRC. Instead, you must use software, like Xero or QuickBooks, to keep digital records and submit digital returns.
Get advice today
For help and advice with related matters, please get in touch with our team today.