It’s no secret that HMRC is pushing out changes to how taxes are handled, an initiative titled Making Tax Digital (MTD). What exactly does this mean for April 2022, the month where MTD for VAT is fully implemented?
When it will happen
To be specific, all VAT must be kept and submitted as a digital record as of April 6th 2022. As of this date, or afterwards, you must submit all VAT returns digitally. The other types of MTD taxes, income tax and corporation tax, have not yet been implemented.
What happens if you don’t comply
Failing to comply with MTD is the same now as failing to file your VAT return, it is mandatory unless HMRC allows exemption. This means that failing to submit your Digital VAT return would incur penalties such as:
- 100% of the overdue or overclaimed VAT
- A 30% fine on the total VAT if HMRC aren’t notified of a low assessment
- 3% interest on all overdue VAT
Applying for exemption
Applying for an exemption is possible when it comes to MTD. Keep in mind that if you have volunteered for VAT and your total earnings are below £85,000 a year, you can simply choose to opt-out. You need only contact HMRC and keep digital records until your next VAT return.
If however, you are earning over £85,000 and are required to submit VAT, you must apply for an exemption. Reasons that are listed as valid would be:
- Your age, a disability or location
- Religious reasons for objecting to technological submissions
- Cause to consider it not reasonable or practical
When you do apply for exemption, you will need a few things:
- Your VAT registration number
- The name and address of the business
- Any details on how you currently submit VAT returns
- Why you believe you should be exempt from MTD
Any decision made by HMRC will be sent via a letter, until this arrives, you should continue filing VAT as you have been.
Preparing for MTD
Some businesses might find it far easier to prepare for MTD than others. This is because without realising it, many businesses use digital methods anyway. If you are using Microsoft Excel to account for your finances, including VAT, you are already MTD compliant.
This solution might be satisfactory for many, as they can easily transfer to this method. However, if it is not, and you wish to take advantage of the various MTD solutions available, you can find them here.