Are you VAT Registered? If so, then you will be affected by Making Tax Digital


by David Watkinson of WatkinsonBlack

EVERY VAT registered business will be liable to report their VAT liability under the Making Tax Digital (“MTD”) legislation for all VAT periods beginning on or after 1st April 2022.

The purpose of MTD according to HM Revenue and Customs is to “tackle the tax gap caused by errors and failures to take reasonable care”, although they also claim that businesses will benefit from greater accuracy and improved productivity.

All businesses that newly register for VAT will be automatically signed up for MTD. Existing businesses must sign up for it, although your agent can do this on your behalf. With regard to the form that records can take, spreadsheets remain acceptable provided that bridging software is used to link the totals on the spreadsheet to those declared on the electronic VAT Return. There must be no typing or retyping of the figures. The electronic VAT Return prepared must be “API” enabled, meaning that it can communicate with HM Revenue and Customs using their digital interface. Of course, MTD enabled accounting software can be used instead, and this will automatically be “API” enabled. WatkinsonBlack are experienced in dealing with MTD and will provide initial and continuing assistance as required to all existing and new clients.

Fortunately, the minimum record keeping requirements are not too stringent. In fact, they are no more than should be kept by all businesses.

As far as sales, or outputs, are concerned, retailers can continue to keep their manual till or cashbox, and individual sales do not need to be recorded. However, they must then digitally record their daily gross takings, and they can do this on a spreadsheet or in a suitable accounting software package. Non-retailers must digitally record their sales invoices and these must be sequentially numbered. Details to be recorded are the tax point for the sale, the net amount excluding VAT, and the rate of VAT charged.

Record keeping requirements for purchases, or inputs, are equally straightforward. Each invoice must be recorded and must, as a minimum, include the tax point of the invoice, the net value of the purchase or expense, and the amount of VAT being claimed.

Whilst there are a very small number of exemptions, mainly on the basis of age, disability or remoteness of location, the time and cost of compliance are not relevant factors in obtaining exemption. Therefore, unless you are either old or decrepit you must expect to be caught by MTD. If you are registered voluntarily, and your turnover is below the VAT deregistration limit of £83,000 per annum, then you may wish to consider deregistration. However, the VAT registration limit is going to remain at the current level of £85,000 per annum until at least April 2024. Therefore, if you expect your turnover to exceed that limit in the near future then you may decide that deregistration is not an option.

And that is enough serious talk this close to Christmas. And so now for something completely different!…

Once upon a time, deep in the middle of the forest, there was a remote monastery where the monks followed a rigid vow of silence. Each year, on Christmas Day, the monks allowed one member of their order, by rotation, to speak but only one sentence. Then silence ensued again for another year.

One Christmas, it was the turn of Brother Thomas to speak. “I love the delightful mashed potatoes we have every year with the Christmas roast!”, he said and then he sat down.

Silence ensued for the next 365 days.

The following Christmas, it was the turn of Brother Michael to speak. “I think the mashed potatoes are lumpy and I truly despise them!”, he said before once again sitting down.

Silence ensued for another 365 days.

The following Christmas, Brother Paul had his turn to speak. He stood up and said, “I am totally fed up with all this constant bickering!”

The directors and staff at WatkinsonBlack would like to wish you all a very Merry Xmas and hope that you all have a prosperous and healthy 2022.

WatkinsonBlack have considerable experience in all areas of taxation and business services, including providing a very cost-effective payroll bureau service.  If you want to arrange a no-obligation initial meeting on any taxation or accounting matter then please contact us.  Our office is now open during all normal office hours.  Please note that these ideas are intended to inform rather than advise and you should always obtain professional advice before taking any action.

Call 01925 413210 for more details or email [email protected]


About Author

Leave A Comment