Making Tax Digital (MTD) for VAT has been with us since April 2019 and has been mandatory for all VAT registered businesses with annual turnover over the VAT registration threshold of £85,000.
So, what is changing now? From April 2022, it will become mandatory for all VAT registered businesses to comply with the requirements of MTD, regardless of what the businesses turnover is.
What exactly is MTD?
It’s a term we have now all heard in one context or another, but there remains much confusion about the details. MTD is the Government’s initiative to move tax and associated systems into the digital age. The key strategy is that under MTD, all tax records will be maintained digitally and returns submitted via HMRC compliant software.
Who Does MTD Apply to?
From 1 April 2022 any VAT registered business will need to make submissions that are MTD compliant.
MTD will be brought in in waves, but the best route to MTD compliance is to make sure everything is up to date now. It will not be very long before MTD will apply to every tax system.
When does MTD take effect?
Currently only VAT returns are affected, but the Government plans to eventually make the entire tax system digital. MTD for Income Tax Self-Assessment (“MTD – ITSA”) comes in to force from 6 April 2024 for self-employed individuals and non-corporate landlords and a year later for partnerships.
No date has been fixed for the introduction of MTD for Corporation Tax (“MTD CT”) but we are told it will not be before 2026.