There is just a week until Making Tax Digital (MTD) comes into effect on 1st April 2022 for all VAT-registered businesses. With this in mind, we have compiled your most asked questions into a quick and easy guide to help you with the transition.
What is MTD for VAT?
Making Tax Digital is a government initiative designed to make tax simpler and to address the £9billion lost each year due to errors. It initially came into effect on 1 April 2019 for businesses with a turnover of £85,000 plus but from 1 April 2022 all VAT-registered businesses need to comply.
What does MTD for VAT mean for my business?
MTD means you will have to digitally record your bookkeeping and submit VAT tax returns online using compatible software. You will no longer be able to submit your VAT tax return on the HMRC website.
Do I have a choice?
No, from 1 April 2022 it will be a legal requirement for all VAT-registered businesses to submit tax returns digitally. There are a few exemptions which you can view here.
What happens if my business doesn’t comply?
If you don’t comply or don’t make the deadlines you could face a fine based on the HMRC’s new points system being introduced from January 2023. The points system means only businesses that continually break the rules are penalised, and those that make occasional honest errors will not be affected. Information on the points system can be found here.
How will MTD for VAT benefit my business?
The introduction of MTD means you’ll have a clear overview of your tax position and a real-time snapshot of how much tax you owe at any point. Having all your information in one place will also make the process simpler, quicker and less likely for errors to occur.
Does Opera 3 cater for MTD for VAT?
Yes it does. HMRC list Pegasus Opera 3 as one of software developers support MTD for VAT. For more information on managing your tax returns in Opera 3 speak to your Pegasus Partner.
What information will my business need to record?
Your business will be required to submit the following information digitally:
Do I need to sign up or is my business automatically enrolled?
You will need to sign up for MTD for VAT on the HMRC website. Business owners will need their firm's Government Gateway user ID and password, alongside its VAT number, to sign up.
When do I need to sign up?
NOW! Back in April 2019 the HMRC gave a soft bounce period for businesses to give them time to adjust to the new obligations, but this time round there is no mention of one. Therefore, if you haven’t already done so, you must sign up now to avoid being late. The sign-up process can take up to three days.
How is MTD evolving?
MTD for Income Tax is expected to come into effect in April 2024 and MTD for Corporation Tax is being introduced after April 2026.