Are you a VAT-registered business with a taxable turnover below £85,000? If yes, then you will need to start following the Making Tax Digital (MTD) for VAT rules from April 2022.
MTD was introduced in April 2019 but at that time, it was only applicable for businesses with a taxable turnover of more than £85,000. Therefore, if you are already following MTD then you do not need to do anything as this round of MTD is only for those who did not comply in 2019. From April 2022 ALL VAT registered businesses who are not following MTD must do so such as businesses with a taxable turnover of below £85,000 (this will affect approximately 1.1 million businesses).
From April 2024 MTD will apply to businesses and landlords who submit Self Assessments for an income over £10,000 but there will be more on the Pegasus blog about this at a later date.
What is MTD? Making Tax Digital means businesses must store their VAT records digitally and use compatible software for their VAT accounting.
The idea behind MTD is to make VAT accounting much simpler and easier to use (and to eventually go completely paperless), and to reduce the lost tax revenue that occurs each year due to incorrect submissions, equating to approximately £9 billion.
If you are not currently VAT registered because you’ve been putting it off due to the paperwork involved, then now might be considered a good opportunity to register for VAT. Many businesses like to register as VAT business to boost their professional credentials and to claim back VAT on business purchases.
By using software, like Opera 3, to complete your VAT return you won’t need to worry about complicated calculations as they are all done automatically within the software and it will electronically work out VAT collected and paid, saving you time and headaches so you can focus on running your business.
First you will need to register for MTD for VAT which can be done online, and you will need the following information:
Once you have signed up for MTD you will need to activate the feature in your software so speak to your software provider about doing that (if you’re an Opera 3 customer, contact your Pegasus Partner).
The deadlines surround MTD are very confusing, particularly as they have been revised several times due to several reasons. If you pay by direct debit then HMRC advise you do NOT register for MTD less than:
This advice is in place to ensure you do not pay twice.
If you are late signing up to MTD, or fail to do so altogether, then there will be penalties applied, subject to the new penalty system, from January 2023.
MTD might seem daunting, but this move aims to make VAT accounting simpler and quicker. Now is the time to start preparing for the changes ahead if they apply to you. Opera 3 is MTD compatible, so Pegasus customers can contact your Partner today to learn more, and if you are interested in learning more about Opera 3 to meet your MTD responsibilities then contact us today.