Making Tax Digital for VAT – what you need to do

making tax digital MTD for ITSA enabling grant

UK Businesses only have a few days remaining before Making Tax Digital becomes mandatory for VAT-registered businesses from 1st April 2022.

making tax digital

All VAT-registered businesses must use Making Tax Digital (MTD) for VAT for their first VAT return starting on or after 1st April 2022.

Making Tax Digital is part of HMRC’s plans to digitalise the tax regime, helping to reduce errors while also making it faster for taxpayers to prepare and submit returns, therefore boosting productivity for businesses.

VAT-registered businesses that have not yet signed up to Making Tax Digital for VAT should do so immediately or could be faced with a penalty.

Before you sign up

Before you sign up to Making Tax Digital for VAT you’ll need either:

Making Tax Digital

Businesses need to choose the software that is right for them, whether that is one of the simple free options available, or a more advanced product for those with more complex affairs.

A full list of software compatible with MTD for VAT, including free and low-cost options, can be found on GOV.UK.

After you’ve got the right software

If you’re signing up your own business, you need to sign up for Making Tax Digital for VAT.

What you need

To sign up you need:

  • your business email address
  • a Government Gateway user ID and password – if you do not have a user ID, you can create one when you use the service
  • your VAT registration number and latest VAT return

You’ll also need:

  • your National Insurance number if you’re a sole trader
  • your company registration number and Unique Taxpayer Reference if you’re a limited company or registered society
  • your Unique Taxpayer Reference and the postcode where you’re registered for Self Assessment if you’re a general partnership
  • your Unique Taxpayer Reference, the postcode where you’re registered for Self Assessment and your company’s registration number if you’re a limited partnership

Records you must keep digitally

You need to keep the following records digitally:

  • your business name, address and VAT registration number
  • any VAT accounting schemes you use
  • the VAT on goods and services you supply, for example everything you sell, lease, transfer or hire out (supplies made)
  • the VAT on goods and services you receive, for example everything you buy, lease, rent or hire (supplies received)
  • any adjustments you make to a return
  • the ‘time of supply’ and ‘value of supply’ (value excluding VAT) for everything you buy and sell
  • the rate of VAT charged on goods and services you supply
  • reverse charge transactions – where you record the VAT on both the sale price and the purchase price of goods and services you buy
  • 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 and use the Gold Accounting Scheme

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

  • volunteers for charity fundraising
  • a third party business
  • employees for expenses in petty cash

When to send your VAT return

The deadlines for sending your VAT returns will not change after you sign up for Making Tax Digital for VAT.

How Blue Spire can help

If you are unsure and would like to discuss Making Tax Digital for VAT, please contact us and we will be happy to help.

Making Tax Digital

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