Making Tax Digital MTD

As we are aware from 01/04/2022 all VAT-registered businesses – regardless of their turnover – must comply with Making Tax Digital (MTD). If you have not already done so and you are VAT-registered, you need to take steps to comply with MTD for VAT requirements.

What is Making Tax Digital?

According to HMRC, Making Tax Digital (MTD) is a huge initiative that seeks to make it easier for people and businesses to “get their tax right” and “stay on top of their tax affairs’. Anyone currently following the rules of MTD for VAT will need to make sure that the software they use is able to send information directly to HMRC going forward.

What is the purpose of the changes?

HMRC believes that using digital record-keeping software and apps can help to prevent businesses from making avoidable tax mistakes, which are estimated to cost the Exchequer almost £10bn a year in lost revenue.

MTD is being phased-in over several years. The first phase of Making Tax Digital for VAT began on 1 April 2019, but it applied only to VAT-registered businesses with a taxable turnover above the VAT threshold (£85,000). It is important to mention that many businesses with a taxable turnover below the £85,000 still register voluntarily, so that they can reclaim VAT on purchases. Up until now, they have not been required to comply with MTD requirements for their VAT record-keeping and reporting. Today we know that as of 01/04/2022 all VAT-registered businesses – regardless of their turnover – must comply with Making Tax Digital (MTD).

The last phase of tax digitalisation will apply to any other NON-VAT registered businesses such as companies, sole traders and landlords with an annual income exceeding £10,000. Chodzi tutaj o spółki/osoby prawne, osoby fizyczne prowadzące jednoosobową działalność gospodarczą, jak również przedsiębiorcy i inwestorzy otrzymujący zapłatę za wynajem nieruchomości o rocznym dochodzie przekraczającym 10 000 GBP. This originally was supposed to begin in 2023 – specifically, from their accounting period starting on or after 6th April 2023. Although it has been put back until April 2024, with the government citing the pandemic as a key reason.

Consequences for companies

Under Making Tax Digital for VAT, businesses must keep digital VAT records and use third-party software to submit their VAT returns to HMRC. That means those that don’t already keep their records digitally will need to start doing so from 1 April 2022.

The software businesses choose to use must be capable of receiving information from HMRC digitally via HMRC’s Application Programming Interface (API) platform.

MTD - where to start...

Those affected by the 1 April 2022 MTD changes are advised to take steps to become compliant as soon as possible, so they can iron out any issues and get everything up and running smoothly before the April deadline.

It is worthwhile mentioning that you can only submit VAT returns digitally if you have authorised your software and set up an appropriate MTD link/connection. If you do not know how to carry out the above, contact us or your software supplier for guidance.