Making Tax Digital (MTD) Phase 2
When introduced in April 2019, MTD for Vat became the biggest tax change in the UK in a generation. This required all Vat registered businesses with an annual taxable turnover above the current Vat registration threshold (£85,000) to sign up to a new method for submitting Vat returns.
With this change came an obligation to keep digital accounting records and the need to submit vat returns via approved software (or use of bridging software). Those signed up to MTD could then no longer submit a Vat return via a government gateway account.
Businesses with a turnover below the Vat threshold could also voluntarily choose to opt in to MTD but once opted in, there would be no facility to opt back out (regardless of turnover levels).
April 2022 will become the next wave of change in extending this obligation to include all Vat registered businesses, regardless of their annual turnover.
What does this mean for businesses not already signed up to and submitting MTD returns:
Timelines Businesses need to comply by April 2022 and practically this means from their first Vat period starting on or after 01/04/22.
Consideration needs to be given to the best time to transition if new software needs to be implemented. This consideration will revolve around business year-end dates and Vat quarter-end dates.
For example:- The first Vat quarter ends that this applies to are: q/e 30/06/2022 q/e 31/07/2022 q/e 31/08/2022
With this in mind, 30/06/2022 business year ends would need to be getting their records onto digital software from the start of that financial year – 01/07/2021
Other Considerations Early adoption of implementing software is highly recommended in order to get up to speed ahead of any compliance deadline.
There are many benefits of using software (up to date records, a better insight of the financial position of the business and better credit control)
*= MTD for income tax will be introduced from April 2023 for unincorporated businesses and landlords with income over £10,000
If you would like to talk through the Vat obligations and changes for your business feel free to get in touch by calling our office 01788 815017 or emailing firstname.lastname@example.org