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Making Tax Digital Update - July 2020

On 1 April 2019, Making Tax Digital (MTD) for VAT was launched.  Although there was a 6 month deferral for certain businesses, all VAT registered businesses with a turnover exceeding the VAT registration threshold should now be maintaining their records digitally and submit their VAT returns via compatible software to HMRC. 

HMRC announced on 21 July 2020, that from April 2022, MTD for VAT will apply to all VAT registered businesses.

Under MTD, impacted businesses will need to use compatible software to maintain digital records and submit it to HMRC via an Application Programme Interface (‘API’).  The current online portal for VAT return submission will not be available to businesses within the scope of MTD.

Compatible software must be able to:

  • Record and preserve electronic records in an electronic form
  • Provide to HMRC information and returns from the electronic records in an electronic form and by using the API platform, and
  • Receive information from HMRC via the API platform.

The complete set of digital records to meet MTD requirements do not all have to be in one piece of software but where more than one piece of software is used there must be a digital link between the pieces of software.  Any transfer or modification of data once digitally recorded must be done using digital links. Manual transfer is not permitted.  An initial 12-month soft-landing period was introduced during which these digital links are not required.  This period has been extended by a further 12 months due to the impact of the COVID-19 pandemic.  This period is intended to allow businesses time to adjust and adapt their accounting systems to accommodate the new rules. However, during this period businesses will still be required to submit their VAT returns to HMRC via compatible software.

We have set out the answers to some frequently asked questions below:

Bridging Software

Are you ready for Making Tax Digital for VAT? If you’ve not yet got the ability to submit your VAT returns to HMRC through compatible software, then bridging software may be the answer.

At Mitchell Charlesworth we are offering an MTD VAT return submission service to ensure businesses who do not yet have compatible software or would prefer to maintain their current VAT recordkeeping process are able to comply with MTD.

Businesses can choose from a submission only service or upgrade to include the review of the return prior to submission.  Opting for the review of the VAT return will include suggestions as to how the process can be updated to comply when the soft-landing period ends, and the VAT return process is required to be more automated.

If you would like to discuss Making Tax Digital in more detail or enquire about our MTD VAT return submission service, we urge you to act quickly and contact our Making Tax Digital team below.