Who needs to comply and when?
Currently, all VAT registered businesses with a taxable turnover above the VAT registration threshold (£85,000), need to comply with MTD for VAT, except those who apply for exemption under specific conditions. From 1 April 2022, all VAT registered businesses, regardless of turnover, will have to comply with all aspects of MTD.
If your business income is under the VAT registration threshold but you are currently registered for VAT, you should monitor taxable income on a monthly basis. If you go over the threshold at the end of any month, you must submit returns digitally for any VAT period starting after the first day of the next month, and maintain VAT records within functional compatible software.
If your business, or charity with business income, is not registered for VAT but becomes required to register due to exceeding the VAT registration threshold, then you must comply with MTD from the first day of your VAT registration. After 1 April 2021 (or October 2021 if your MTD start date was deferred) you will also need to maintain digital links between component parts of your accounting system.
What are the requirements?
- To keep VAT records within functional compatible software
- To provide VAT return information to HMRC via an API (Application Programming Interface) through MTD compatible software
- To transfer or exchange data between software programs, products or applications via ‘digital links’, without manual intervention - this applies from 1 April 2021 (or October 2021 for deferred businesses)
One of HMRC’s aims for MTD is to reduce the VAT lost through errors and mistakes arising from manual input (click here to see the HMRC guidance on this in VAT Notice 700/22).
Before you use a software to submit your digital VAT returns you need to sign up to MTD with HMRC (click here for the process).
The transfer and exchange of data between component parts of your ‘functional compatible software’ must be digital after 1 April 2021/October 2021, which is the extended deadline due to COVID-19 (click here for more information). Therefore all businesses mandated from 1 April 2019 onwards need to ensure that all transfers or exchanges of data between software programs, products or applications is made via a ‘digital link’ without manual intervention.
How we can help
Submission of returns - Buzzacott's bridging solution
Firstly, check if your existing accounting software is compatible with MTD; most of the major accounting software providers, Xero, QuickBooks and Sage are compatible and will provide the Application Programming Interface link. If you are partly exempt, you need to adjust the data posted to the VAT account before submitting the return. If your software isn’t compatible, don’t worry! We have designed a bridging solution that allows submission of your VAT returns directly to HMRC in a way that is compliant and hassle free. We are also on hand to assist you with a review of your VAT return process, identifying digital “gaps”, preparing or submitting your VAT returns and supporting your decisions on MTD compliance. Get in touch below for more information.
"Just a short note to say a massive thank you for the MTD solution. It was straightforward to use and the user guide worked in taking us through step by step. Thank you to all involved, you’ve made something I was concerned about very easy for us!" Becky Morris, Financial Controller - Diocese of Oxford