If you are VAT registered, are you ready for the Making Tax Digital changes from 1 April 2022?

What are the MTD for VAT rules?

The main requirements of the Making Tax Digital for VAT rules are

a) Business records must be maintained in a digital format

b) Quarterly VAT returns must be submitted using API (Application Programming Interface) enabled software.

You can read more about these requirements in our guidance ‘What are digital records?’ and ‘How do I file my VAT return once I am in Making Tax Digital for VAT?’.

These rules apply from your first VAT quarter beginning on or after 1 April 2022 onwards if you are voluntarily registered for VAT. You can find your start date in table 1.

Who is exempt from Making Tax Digital for VAT?

If you are already exempt from filing your VAT returns online then you continue to be exempt from MTD for VAT and do not need to reapply for exemption. Otherwise, you need to meet certain criteria. See our guidance ‘Who is exempt from the Making Tax Digital rules?’ for more details.

If exemption is granted – or while HMRC consider your application - you should carry on filing your VAT returns using HMRC’s online portal as you have been doing in previous quarters.

I am voluntarily registered for VAT and not exempt so what do I need to do now?

Unless you decide to cancel your VAT registration (which you can do if you expect your VATable sales income to be less than the de-registration threshold of £83,000 in the next 12 months), there are two things that need to be done:

a) Decide what changes you need to make, if any, to your record-keeping systems

If you do not keep your records digitally now, you need to decide how you are going to change to a digital system. There are lots of different products on the market so it might be difficult to choose one that you think will work for you. See our suggestions of things to consider when going digital in our section on digital records.

If you are worried about using a fully integrated accountancy package, another option is to record your transactions on a spreadsheet such as excel then purchase bridging software which will link the data from your spreadsheet to HMRC’s systems.

You need to make sure the software product you use is MTD compatible. You can find out more about this on GOV.UK.

b) Work out when you need to sign up for MTD for VAT.

It is important that you don’t sign up for MTD for VAT until you have submitted your final VAT return under the old system. When you need to sign up depends on what your VAT quarters are and whether or not you pay your VAT bill by Direct Debit. You can look up when your sign up window is in table 2.

I didn’t realise I should already be in MTD for VAT now. What should I do?

You should sign up for MTD for VAT and begin to comply with the new requirements as set out above as soon as possible. There is a risk you may be charged penalties by HMRC for not filing VAT returns in line with the MTD rules. If you do get charged a penalty you should think about whether you have a reasonable excuse for not signing up on time. If you do think you have a reasonable excuse then you should appeal against any penalties within the 30 day appeal period.

Where can I get more information?

We have published detailed information about MTD for VAT in the tax guides part of our website.