Deadline Looming for Making Tax Digital for VAT Registered Businesses

With effect from 1 April 2022, all VAT registered businesses, regardless of turnover, will need to submit VAT returns digitally, using approved software. Until now, only businesses with a turnover above the VAT registration threshold, currently £85,000, were affected by Making Tax Digital (MTD).

The change comes into effect for the first VAT period starting on or after 1 April 2022 and it will require businesses to maintain digital records of their transactions and use software to submit VAT returns to HM Revenue & Customs (HMRC).

There are two possible routes that businesses can take with software. The first option, and probably the most robust, is to adopt software that can be used to complete bookkeeping from end to end, i.e. record business transactions, undertake bookkeeping and submit the return to HMRC. There are many software choices available, however, all come with a cost (although some banks offer free software for a limited period). The second option is to use bridging software. Bridging software is favoured where a business uses spreadsheets to record business transactions, however, certain rules apply – the most important of which is that “cutting and pasting” from one spreadsheet is not accepted as a digital link. Formulas must be used to link one spreadsheet to another. In practice, there is a risk that errors may occur if formulas are not accurate. It should also be noted that there will be a cost for bridging software.

It is possible that some businesses will find it impractical to use software to maintain their records and submit VAT returns. This may be, for example, on the grounds of age, religion or location, i.e. no internet connection. In any of these cases, it is possible to apply for an exemption, however, HMRC has stated that it will assess each case individually so this may take some time.

We are aware that HMRC has recently sent a letter to all businesses affected by these changes and you may be unsure of the next steps to take.

At Scott & Wilkinson, we have specialists who can assist your business in becoming digitally compliant and ensure there is a seamless transfer onto the new software. We offer services including system implementation, training on how to use the software, registering with HMRC for MTD and supporting you through the initial MTD VAT return submission. We can also assist with applying for digital exclusion or, if you would prefer, we can undertake your bookkeeping for you.

If you require any assistance in preparing for MTD, please do not hesitate to contact the office on 01524 67111.