Making Tax Digital (MTD) for VAT was initially rolled out for VAT registered businesses with turnover above the VAT registration threshold of £85,000 in April 2019.
- Phase one, in April 2019, required businesses with an annual turnover above the UK VAT registration threshold to submit their VAT returns electronically.
- Under phase two, businesses were required to have in place digital links between their source/original data all the way through to the final VAT return figures submitted to HMRC. Originally planned for April 202, this phase was delayed until April 2021 due to the COVID pandemic.
Our previous blogs outlined the requirements for phases one and two of MTD for VAT.
However, as of 1st April 2022, phase three will see MTD for VAT extended to all VAT registered businesses, regardless of turnover. If your business fails to be MTD compliant, you may face financial penalties (more on this to follow).
What is changing from 1 April 2022?
From the first VAT period starting on or after 1 April 2022, VAT registered businesses with an annual turnover below the VAT registration threshold that have not voluntarily signed up to MTD will now be required to sign up.
In effect, from the first VAT period starting on or after 1 April 2022, all VAT registered businesses, including self-employed businesses and landlords, regardless of annual turnover will be required to sign up for MTD. All VAT registered businesses will need to:
- Keep their VAT records digitally; as well as
- Submit VAT returns to HMRC through MTD compatible software.
Unlike earlier phases, there is no ‘soft landing’ period for phase three of MTD. Consequently, if you are not already signed up for MTD, it is important that you:
- ensure your processes are MTD compliant; and
- are signed up by the relevant date.
