HMRC urges VAT-registered businesses to sign up for Making Tax Digital
HMRC is urging businesses to take steps to prepare for Making Tax Digital for Value Added Tax (VAT) before it becomes mandatory for all VAT-registered businesses from 1 April this year.
Making Tax Digital is designed to help businesses eliminate common errors and save time managing their tax affairs. It is part of the overall digitalisation of UK Tax.
In a recent independent study of over 2,000 businesses, 69% reported experiencing at least one benefit from Making Tax Digital. These included preparing and submitting returns faster and increased confidence that they were getting tax right. Sixty-seven percent of businesses also felt Making Tax Digital had reduced the potential for mistakes in at least one aspect of the record keeping, preparing and submitting returns process.
As of December 2021, nearly 1.6 million taxpayers had joined Making Tax Digital for VAT with more than 11 million returns successfully submitted. Around a third of VAT-registered businesses with taxable turnover below £85,000 have voluntarily signed up to Making Tax Digital for VAT ahead of April 2022, and thousands more are signing up each week.
Since April 2019, businesses with a taxable turnover above £85,000 have already been required to follow Making Tax Digital, keeping digital records and filing VAT returns using Making Tax Digital compatible software.
In July 2020, it was announced that all VAT-registered businesses must file digitally through Making Tax Digital from April 2022, regardless of turnover. HMRC is now reminding businesses below the £85,000 threshold of the steps which they need to take to be ready.
If businesses have not yet signed up to Making Tax Digital for VAT, they should do so now to ensure they are ready in time for the April 2022 deadline.
Joanna Rowland, HMRC’s director general for transformation, said: “Making Tax Digital is fundamental to the delivery of a trusted and modern tax system, making it easier for businesses to get their tax right and supporting the UK to go digital.
“By signing up for Making Tax Digital, we expect most businesses to experience long-term benefits, including reduced errors and time saved in managing their tax affairs. We encourage businesses to explore digital record-keeping for their VAT affairs and use this time to choose the right software to support their business needs.”
Mike Cherry, FSB national chair, added: “We have worked hard to ensure Making Tax Digital launch dates were adjusted to give small businesses more time to prepare and allow more competition to open up in the accounting software market. It’s important that firms do all they can to get ahead of deadlines and access the affordable platforms that are now available; if they are members of FSB, they will have access to a new easy Making Tax Digital member service that we are creating.
“We’ll continue to work with government, and through our support services, to minimise the admin and cost impacts of Making Tax Digital on small firms whilst unlocking the productivity gains the initiative could bring.”