Voluntary VAT registered business liable to Making Tax Digital for VAT bookkeeping, digital links and API filing requirements
From 1 April 2022, all VAT registered businesses are mandated to follow the UK’s requirements on digital recording and reporting Value Added Tax details. This means for the first time, any business which is below the UK VAT registration threshold of £85,000 but has elected to voluntarily VAT register will now be subject to MTD for VAT requirements.
Affected businesses will have to register with HMRC for MTD returns filing by at least 5 days after their last return deadline, and no less than 7 days before their first MTD for VAT return deadline. This will likely oblige many hundreds of thousands of micro-businesses to invest in accounting software or API-enabled bridging spreadsheets for the first time, or just upgrade, to comply with the requirement to have an uninterrupted digital journey from invoice to VAT return. There is no allowance for manual bookkeeping or data manipulation.
MTD for VAT is the UK’s first stage of digitising tax reporting and will be rolled out to other taxes in the next few years, including Income Tax in April 2024.
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MTD for VAT roll out
HMRC rolled out its MTD for VAT programme in three stages:
- April 2019 – mandated VAT registered business to file their regular return via the new API portal
- April 2021 – digital bookkeeping and digital links requirements introduced. At the same time, MTD for VAT requirements became subject to regular VAT penalty regime. This measure was originally scheduled for April 2020, but was delayed due to the COVID-19 pandemic.
- April 2022 – all voluntarily VAT registered business below the VAT registration threshold of £85,000 must also comply with the above requirements.
Some VAT-registered businesses may be eligible for an exemption from Making Tax Digital, if it is not reasonable or practicable for them to use digital tools for their tax. If a business has previously been granted an exemption for VAT online filing, this will carry over to Making Tax Digital VAT requirements.