On 21 July 2020, it was announced that MTD for VAT will be extended to all VAT registered businesses, regardless of turnover, from April 2022. Currently, MTD only applies to businesses with taxable turnover above the VAT threshold which is £85,000.
Making Tax Digital for VAT
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.
MTD Ready Accounting Software
In Business Central you can use the VAT Return report for creating VAT reports. The Making Tax Digital VAT features extend this capability to communicate with HMRC. For example, the Making Tax Digital VAT extension lets you:
- Retrieve VAT obligations from HMRC
- Get reminded about VAT obligations that are approaching or already past due
- Submit VAT returns to HMRC
- View the VAT return
- View VAT payments with HMRC
- View VAT liabilities with HMRC
You can view a list of all the software on the HMRC’s recognition list here. HMRC does not endorse or recommend anyone product or software provider.
MTD for VAT Deadline Extended
The COVID-19 pandemic has led to an extension to the deadline for implementing digital links for MTD for VAT. HMRC said: ‘We understand that the impact of COVID-19 is creating extremely difficult times for all, and we are committed to helping in every way possible all those businesses facing unprecedented challenges. Therefore, we are providing all MTD businesses with more time to put in place digital links between all parts of their functional compatible software. This means that all businesses now have until their first VAT return period starting on or after 1 April 2021 to put digital links in place.‘
Supporting our Customers
If you require assistance in preparing for MTD or adjusting your VAT percentages in line with the recent government changes our team is here to help.
Dynamics 365 Business Central is set up by default to support MTD. If you are ready to upgrade Dynamics NAV, chat to our team about your upgrade options.
VAT Notice 700/22: Making Tax Digital for VAT
4.2.4 Introducing the examples in section 8 of this notice
The examples in Section 8 include a number of examples of situations where a VAT registered entity is using a set of software programs with digital links that meet the requirements of Making Tax Digital. The examples also include situations where the transfer of data between programs does not need to be through a digital link as well as situations where a digital link is not mandatory for VAT periods starting before 1 April 2021.
Self-employed businesses and landlords with annual business or property income above £10,000 will need to follow the rules for MTD for Income Tax from their next accounting period starting on or after 6 April 2023.
The government will consult late in 2020 in relation to corporation tax.