Making Tax Digital changes expected in April 2022

Since April 2019 VAT registered businesses that earn over £85,000 have needed to comply with Making Tax Digital legislation. This will soon be extended to all businesses that charge VAT, regardless of the £85,000 threshold. This article covers everything you need to keep up with the Making Tax Digital changes coming in April 2022.

The expansion will affect any VAT registered businesses currently submitting VAT by post or using the HMRC portal. Moving forwards, these businesses will need to use an approved software or risk fines for non-compliance.

Digital VAT Record Keeping

Where paper receipts and invoices might have been kept as records previously, MTD requires a move to digital record keeping. The following information must be digitally recorded and stored to comply with the MTD rules.

• your business name, address and VAT registration number
• details of any VAT schemes you use
• the VAT on goods & services you supply (everything you sell, lease, transfer, or hire out)
• the VAT on goods & services you buy, lease, rent or hire
• notes on any adjustments you make to a VAT return
• the ‘time of supply’ and ‘value of supply’ or everything you buy and sell
• the rate of VAT charged on goods and services you supply
• reverse charge transactions
• your total daily gross takings if you use a retail scheme
• items you can reclaim VAT on if you use the Flat Rate Scheme
• your total sales, and the VAT on those sales, if you trade in gold & use the Gold Accounting Scheme

You’ll also need to keep digital copies of documents that cover transactions made on behalf of your business by

• Volunteers for charity fundraising
• A third-party business
• Employees for expenses in petty cash

More information on digital record keeping can be found online at the Government’s MTD hub.

What is MTD approved software?

Software that’s compatible with Making Tax Digital for VAT allows you to keep digital records and submit your VAT returns through the software. If you’re already using a software package and don’t want to upgrade, there are bridging tools that allow you to connect non-compatible software to HMRC systems (including spreadsheets)

How can you prepare for MTD?

If your business is affected by the Making Tax Digital changes in April 2022, it’s time to start preparing now. The first thing you’ll need to do is ensure that your accounting software is compliant. Many up-to-date programs include functionality that complies with the legislation.  You can find a full list of software that has been through HMRC’s recognition process here.

If you are using accounting software on a perpetual license though, you might find that it is not ready to deal with MTD changes. Where possible we recommend upgrading to a Sage 50 subscription license – this will give you access to the latest upgrades and cover you for any future changes.

If you’re not in a position to switch to an accounting software subscription, you can use a bridging tool instead. The bridging software will allow you to submit your MTD VAT returns in CSV format which is submitted directly to HMRC.

For more information you can visit our MTD module page.