HMRC confirms April 2022 extension

HMRC confirms April 2022 extension

HMRC has confirmed that Making Tax Digital for VAT (MTDfV) will definitely be extended to 1.1 million businesses from 1 April 2022. Who is affected and what does it mean for your business?

Extension. HMRC has confirmed that Making Tax Digital for VAT (MTDfV) will be extended to all voluntary registrations, including charities and not-for-profit organisations such as sports clubs, from 1 April 2022. These are registrations for businesses where annual taxable turnover is less than £85,000. In other words, your business could deregister if you wanted, as long as sales in the next twelve months are expected to be less than the deregistration threshold, which is £83,000.

Tip. If you deregister before 1 April 2022, you won’t need to worry about complying with MTDfV . But you will obviously lose the opportunity to claim input tax on your expenses.

Advantage. HMRC claims that MTDfV will reduce or eliminate paper-based or manual processes, which have a higher risk of errors being made. It expects that it will be easier for you to submit accurate VAT returns each period. Automated processes will hopefully save you administration time, giving more time to focus on running your business.

Responsibilities. You must keep digital records for your sales and purchases for VAT purposes. You must also submit your returns to HMRC through compatible software. Further information is contained in VAT Notice 700/22 (see The next step ).

Tip. You can use spreadsheets to do your accounts, however, you will need to buy bridging software to give a link between your spreadsheet totals and the VAT figures submitted to HMRC on your returns.

Time. HMRC has confirmed that a quarter of voluntary registrations are already MTDfV compliant - now is the time for action to get digital systems in place before 1 April 2022 if you are not yet prepared.

If you are voluntarily registered, you must have software compliant with MTDfV in place by April 2022 so that you can keep digital accounting records and submit returns online to HMRC. You might consider deregistering instead.