After almost seven years in the making – the concept of digitalising tax was first proposed back in 2015 – the Making Tax Digital (MTD) deadline is officially here.
All VAT-registered businesses had until 1st April 2022 to register for Making Tax Digital. With this in mind, we thought we’d take a closer look at what those quarterly VAT accounting periods will look like under the new MTD rules.
Making Tax Digital – a brief introduction
It has been pretty difficult to escape news of the Making Tax Digital initiative. Under the Making Tax Digital rules, businesses and individuals are required to keep digital records and submit their VAT returns digitally to HM Revenue and Customs (HMRC).
The digitalisation of tax administration represents one of the biggest fundamental changes to the way the UK tax system works. It’s designed to make record keeping and submissions easier to manage. MTD has been slowly rolled out to apply to VAT returns, and will apply to Income Tax and Corporation Tax in the coming years also.
Your first quarterly VAT accounting period under MTD rules
With all VAT-registered businesses now required to comply with MTD rules as of 1st April 2022, the way VAT returns are submitted is changing. The first quarterly VAT accounting period the MTD rules apply to however varies from business to business.
If your quarterly VAT period came to an end on 31st March 2022 for instance, your next quarterly VAT accounting period (commencing on 1st April) will have to be digitalised in accordance with the new Making Tax Digital rules.
Those with periods ending later, i.e. on 31st May 2022, don’t have to comply with Making Tax Digital until their new accounting period begins on 1st June 2022. MTD rules vary further still for those with monthly or annual VAT accounting periods.
Registering and preparing for Making Tax Digital
It’s important to note that registering for Making Tax Digital isn’t automatic. You must register your business before your first MTD VAT return needs to be submitted. Failing to do so could cause an overlap in the new and old VAT systems.
Registering with plenty of time is what we’d recommend. You’ll also be required to set up a new direct debit if this is the way you settle your VAT payments.
To prepare for your transition to Making Tax Digital, make sure you are aware of the deadlines that apply to your business. You should also select the MTD-compliant software that suits your company and train your wider team on the use of MTD within your organisation.
Working with our accountants is a great way to prepare your company for Making Tax Digital. We can also assist the sole traders and landlords who will have to comply with MTD rules for Income Tax ahead of the April 2024 deadline.
Contact us today to access the advice and support you need to future-proof your company and its finances.