Making Tax Digital for VAT is coming – are you prepared?


From April 2022, Making Tax Digital (MTD) for VAT will be extended to cover all VAT registered businesses, regardless of their turnover. As a result, many voluntary VAT registrations will be brought within the scope of MTD for the first time.

Since its introduction in 2019, MTD for VAT has only been compulsory for businesses with taxable turnover above the VAT threshold (currently £85,000). VAT registered businesses trading below the threshold, often referred to as “voluntary registrations”, could sign up for MTD if they wanted to but they didn’t have to.

That changes from April 2022, when MTD for VAT will be extended to cover all VAT registered businesses, regardless of their turnover.

MTD for VAT: what changes will it bring?

Under Making Tax Digital for VAT, businesses must keep digital VAT records and use third-party software to submit their VAT returns to HMRC. That means those that don’t already keep their records digitally will need to start doing so from 1 April 2022.

Not yet registered? As a quick reminder, under MTD for VAT, businesses will now have to:

  • keep their records digitally;
  • use MTD-compatible software to submit their VAT returns; and
  • have ‘digital links’ in place between the pieces of software used to carry out those functions.

For businesses coming into MTD this April, these requirements will apply to their first VAT period starting on or after 1 April 2022.

The first step towards MTD compliance for those businesses will be to ensure they have the right software in place to meet their MTD requirements. They will then need to sign up for the MTD for VAT service at the right time*

*We advise speaking to your accountant or a financial planner for more information

Are there any exceptions to MTD for VAT?

The extension to the MTD regulations applies to all VAT registered businesses and organisations in the UK. There are a very small number of exceptions if it is not reasonable or practical because of your age, a disability or you have religious grounds for not using the internet and computers.

HMRC will consider exemptions on a case-by-case basis, and you will need to have a strong reason to be exempted.

What do businesses need to do now?

Now is the time to talk to your accountant to help you understand the MTD changes and how to sign up and start filing reports through MTD. An accountant or tax adviser can advise on how and when to digitise any paper-based systems. Businesses may also benefit from having a discussion with the M.B. McGrady & Co. Making Tax Digital team who can give professional advice and training on financial software and help businesses to integrate cloud-based accounting solutions into their business processes. As well as helping to make MTD easier to manage, the M.B. McGrady team can show you how to maximise new or existing software in order to drive your business forward.

Now is the time to act

In order to be compliant in time, voluntary registrations need to start looking into their MTD obligations and software options as soon as possible.

More information on signing up for MTD for VAT is available on the website.