From April, if you’re VAT registered but below the VAT threshold, you will need to keep digital records and use compatible software to file your returns.
Making Tax Digital (MTD) for VAT was introduced in April 2019. However, to date, businesses with taxable turnover below the VAT threshold (currently £85,000) have been exempt from its requirements.
That will all change in April 2022, when this £85,000 turnover exemption will cease to apply. As a result, all remaining VAT registered businesses (including those who have registered voluntarily) will be required to join MTD for VAT.
Under MTD for VAT, businesses have to:
- keep their records digitally; and
- use MTD-compatible software to submit their VAT returns.
For affected businesses, the requirement to keep digital records and file using MTD-compliant software will apply from the first VAT period starting on or after 1 April 2022. They will also need to sign up for the MTD for VAT service in advance of filing their first MTD return.
Exemptions will be available where it is not reasonable or practical for businesses to follow the MTD for VAT rules (for example due to disability or age). Businesses that are already exempt from filing VAT returns online will automatically be exempt from MTD for VAT. Any other business seeking exemption must apply to HMRC.
You can find more information on MTD for VAT on the ATT website and GOV.UK.