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MTD for VAT from April 2022

HMRC has started to write to VAT registered businesses with turnover below £85,000 to alert them to the need to comply with MTD for VAT requirements from April next year.

Since Making Tax Digital (MTD) came into force in April 2019 com a VAT registered businesses in the UK above the £85,000 registration threshold are required to submit their VAT returns using “functional compatible software” uninstall the V80 accounting records digitally.


As of 1 April 2022, all VAT registered businesses will be required to comply with the MTD for VAT regime.


This will affect around 1.1 million UK businesses that are registered for VAT with taxable turnover below the current threshold of £85,000.


The first batches of letters of intent in November and December 2021 to stagger quarterly filers and those who file monthly or annual VAT returns. Similar letters will be sent to stagger quarterly filers in February 2022. HMRC is trialling three different versions of the letters to help assess the success of slightly different approaches which will help it to design feature communications campaigns.


Version 1 explains to the business that the way they keep VAT records and submit their VAT returns to HMRC is changing and that the new way of doing things is called Making Tax Digital. It also says the business can join early if it wants too. Version 2 is shorter at indicates that the VAT system is being modernised, and the business needs to get ready for the change now.


There is then advice on how to join the new service, with links to help and advice on gov.uk.


About a third of VAT registered businesses with taxable turnover below the threshold have already signed up to MTD for VAT voluntarily and should not receive a letter. Some businesses may wish to apply for a digital exclusion exemption; HMRC has indicated that it is now accepting applications from those who require an exemption from April 2022.


MTD for ITSA (Income Tax Self-Assessment) will start in April 2024 for the self-employed and those with income from property and in April 2025 for most partnerships. MTD Corporation Ta will not start until April 2026 at the earliest and is likely to be later.


HMRC has started to write to VAT registered businesses with turnover below £85,000 to alert them to the need to comply with MTD for VAT requirements from April next year.


VAT records for Making Tax Digital


VAT registered businesses with a taxable turnover of more than £85,000 must follow the rules for “Making Tax Digital for VAT” by keeping some records digitally, unless:

  • Your business uses the VAT giant service for example, if you're a government department or an NHS Trust;

  • You apply for an exemption.

You can choose to sign up to making tax digital for that if your business earns less than £85,000.


Records you must keep digitally


You need to keep the following records digitally:

  • Your business name, address and VAT registration number;

  • Any VAT accounting schemes you use;

  • The VAT on goods and services you supply, for example everything you sell, lease, transfer or hire out (supplies made);

  • The VAT on goods and services you receive, for example everything you buy, lease, rent or hire (supplies received);

  • Any adjustments you make to a return;

  • The “time of supply” and “value of supply” (value excluding VAT) for everything you buy and sell;

  • The rate of VAT charged on goods and services you supply;

  • Reverse charge transactions – where you record the VAT on both the sale price and the purchase price of goods and services you buy;

  • Your total daily gross takings if you use a retail scheme;

  • Items you can reclaim VAT on if you use the Flat Rate Scheme;

  • Your total sales, and the VAT on those sales, if you trade in gold and use the Gold Accounting Scheme.

You also need to keep digital copies of documents that cover mulitiple transactions made on behalf of your business by:

  • Volunteers for charity fundraising;

  • A third party business;

  • Employees for expenses in petty cash.

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