In April 2019 MTD for VAT became a legal requirement only for VAT-registered businesses over the registration threshold (currently £85,000).
In April 2022, a new stage will be introduced.
Making Tax Digital for VAT will then apply to all VAT-registered businesses, including those voluntarily registered for VAT, regardless of turnover.
MTD will be compulsory for ALL VAT registered businesses from April 2022.
MTD for VAT requires you to keep some records digitally:
Some businesses will need to keep more or less information depending on their VAT scheme and circumstances.
If you print or even handwrite invoices or receipts, then you’ll need to transfer the VAT accounting information to your accounting software before you submit your VAT Return.
Remember not to destroy the paperwork because you could require it for other aspects of your accounting.
When MTD for VAT started in April 2019, HMRC gave businesses a soft-landing period, allowing them to continue copying and pasting data for their VAT accounting without penalties until April 2020. Ordinarily, this was prohibited because of MTD’s digital linking rules.
At the beginning of the coronavirus pandemic, HMRC decided to extend the soft-landing period to April 2021.
However, this period has ended, and there are no signs HMRC will allow a similar period as of April 2022.
Therefore, any business switching to MTD for VAT needs to ensure digital links are used throughout their VAT accounting.
There are strict rules on what defines a digital link for MTD. According to HMRC, they have two characteristics:
The critical difference between MTD for VAT and how you may have been filing VAT Returns before is that you must now use software for your VAT accounting and file VAT Returns using software.
You probably have to use an MTD for VAT feature within cloud accounting software, where data is stored securely online.
If you aren’t using cloud accounting software or are using older software (or even no software at all), you will need to plan an upgrade path to be ready in time for your first full VAT period after April 2022.
MTD for VAT applies if you use VAT schemes offered by HMRC, such as the flat rate, margin, or retail schemes.
If you’re VAT-registered, then you can register for MTD for VAT at any time. This is true even if your business isn’t yet legally required to register for VAT until April 2022.
MTD enrolment is automatic if you’re signing up for VAT for the first time.
However, if you’re voluntarily registered for VAT, the latest you must register for MTD for VAT is before the end of your first full VAT period following April 2022.
If you’re already registered for VAT, your business won’t be enrolled automatically for MTD.
The registration process involves logging in with the Government Gateway account for your business. You might have used this previously when filing VAT Returns via the portal website.
If you don’t have an account, create one with an email address.
Note that once you’re registered for MTD for VAT, you will probably need to activate the MTD functionality in the software.
This will require your MTD login details.
To register for MTD for VAT with HMRC, you’ll need to input the following information when requested upon visiting the MTD for VAT registration website:
You will need to inform HMRC during registration which MTD-compatible software you’re using for your VAT accounting, so you will need to make this decision ahead of time.
You can file the VAT Return, or your accountant can do so on your behalf.
They will use their HMRC Agent Services account to do this and will need to register on your behalf with HMRC, so you should discuss this with your accountant well ahead of time.