MTD for VAT to apply to all VAT registered businesses wef 1 April 2022

MTD for VAT will be extended to all VAT registrations for periods beginning on or after 1 April 2022. Businesses and organisations with annual taxable sales between £0 and £85,000 must join the MTD club, if they are VAT registered.

The legislation was amended by SI 2021/986, which removes voluntary registrations from the list of entities that do not need to comply with MTD – Reg 32B, VAT Regulations 1995 – with the deletion of paras 2 to 5 about exemptions.

Considerations

1. Spreadsheets allowed

Spreadsheet accounting will be acceptable, as long as there is bridging software in place to link the VAT totals on the spreadsheets to the figures declared on the electronic VAT return that is submitted to HMRC. There must be no typing or retyping of the figures.

2. New registrations

Newly registered businesses will be automatically signed up for MTD. An existing business should go to the gov.uk page: Sign up for Making Tax Digital for VAT.

3. Which period does MTD apply from?

The new regulations will apply to VAT periods beginning on or after 1 April 2022. This means, for example, that the start date for a voluntarily registered business with period ends of February, May, August and November will be 1 June 2022.

4. Retailers’ records

Retailers must digitally record their daily gross takings figures, but it is not necessary to record each individual retail sale. For example, a coffee shop can have a manual till or cash box to record its takings but must digitally post each day’s total sales figure.

5. Other businesses

Record keeping for sales invoices must include the tax point for the sale, the net amount excluding VAT and the rate of VAT charged (VAT Notice 700/22, para 4.3.2). For purchases invoices, you must include the tax point, the net value of the expense and the amount of input tax being claimed – VAT Notice 700/22, para 4.3.3.

6. Digital from day one

There will be no ‘soft landing’ period where, for example, cut and paste can be used to transfer figures between, say, spreadsheets and VAT return totals. A digital audit trail must be in place from day one.

7. Only nine figures

HMRC will only receive the figures included in the nine boxes of the VAT return each period. HMRC inspectors will not be able to access the entries for individual transactions that make up the totals.

8. API enabled

The software used by a business must be capable of sending information to and receiving information from HMRC digitally via its Application Programming Interface (API) platform. In the case of spreadsheets, it is likely that the bridging software will be API enabled, rather than the spreadsheets.

9. Consider deregistration

If taxable sales are expected to be less than £83,000 in the next 12 months, it may be worthwhile deregistering for VAT. Remember, however, this will obviously entail an input tax sacrifice on expenses and you will need to reregister if sales exceed the £85,000 VAT threshold.

 

 

Comment

4 Eyes Ltd can advise your business on VAT compliance. Where necessary we can submit VAT returns on your behalf using our bridging software. Please contact us if this is of interest.