As of the 1st of April 2022, all VAT records must now be recorded digitally, and you must submit returns under the Making Tax Digital (MTD) regime. If you have not already started using MTD-enabled software or instructed your accountant to, it is vital to take action.

How To Transition To MTD

To transition to MTD, we recommend first reviewing how you record your VAT transactions. While a spreadsheet will still be acceptable, you will need to implement software that can transmit this VAT return data to HMRC without having to retype or copy and paste the data. There are many different software options to choose from, such as cloud-based software and simple bridging alternatives. Our team would always be more than happy to work with you to determine the best route, so feel free to contact us to arrange a meeting.

Next, you will need to sign up for MTD with HMRC, as although you will already be VAT registered, there is a separate mechanism to get into the MTD system. Again, our team can help you with this.

For those that pay their VAT via direct debit, you will need to allow five days after the due date for your last VAT return before signing up for MTD. Try to do this as soon as possible, as you will need to be in the MTD system at least 7 days before your first MTD VAT return is due.

There Will Be Consequences For Failing To Comply

Now that it is compulsory, there will be consequences for ignoring MTD. HMRC are within their right to impose penalties for refusal to comply, including £400 for failing to submit your VAT return in the correct format.

If you have a relatively low turnover and do not expect it to increase, please let us know as we can discuss whether you would benefit from deregistering to avoid the MTD regime.