HMRC issues Making Tax Digital wakeup call

The UK’s tax authority has issued a reminder urging businesses to prepare for Making Tax Digital for VAT, which becomes mandatory for all VAT-registered businesses from 1 April 2022.

MTD is already obligatory for all UK businesses with a taxable turnover exceeding the UK VAT threshold of £85,000. From 1 April, all VAT registered businesses must comply with MTD, regardless of turnover. 

Under MTD, businesses submit quarterly electronic updates, using compatible software.  MTD for VAT means that businesses now are required to have appropriate technology in place to meet their VAT obligations. 

When MTD makes VAT compliance easier 

Ultimately,  MTD for VAT is supposed to make VAT compliance simpler for businesses. According to a UK government survey, the program does just that - with an important caveat. Researchers found that MTD reduces errors and makes compliance more efficient, but only if companies use fully compatible technology. 

The survey found that businesses that do not use fully compatible software are less likely to benefit from MTD.

Making Tax Digital Phase II

Note that under MTD Phase II, which is currently in effect, which has stringent requirements for how VAT information must be uploaded to HMRC.

In order to comply with Phase II, it is therefore critical to ensure your accounting software meets the prescribed standards. 

For VAT IT customers, compliance with MTD Phase II is simple, as VAT IT’s domestic VAT compliance software meets all digital requirements, and makes managing VAT simple, efficient and secure.