Sign up for Making Tax Digital (MTD)

HMRC requires all VAT registered businesses to sign up for Making Tax Digital (MTD) by April 2022. Businesses making sales of more than £85,000 should already be adopting the MTD rules.

After you enrolled to the MTD programme, your business must do the following:

  • Sign up to MTD and follow the rules.
  • Keep digital records
  • Submit your VAT returns using MTD compatible software.

For businesses with sales below £85,000 have the option to sign up for the MTD programme voluntarily before April 2022. However, even if your business is not yet signed up for Making Tax Digital (MTD) programme, you are required to use MTD compatible software to file your VAT returns from 8 April 2021.

After this date, HMRC will no longer accept VAT returns submission using EXtensible Markup Language (XML) software. The reason for this change is that HMRC is migrating to a new IT system as part of their digital transformation and this new IT system does not accept XML VAT returns submissions.

Submit your VAT returns using Making Tax Digital (MTD) compatible software

If you do not yet sign up for Making Tax Digital (MTD) after April 2021, you can use the HMRC Business Tax Account to submit your VAT returns.

You would require your Government Gateway user ID and password you created when you first registered a business tax to login into your HMRC Business Tax Account.

Alternatively, you may appoint an accountant to submit your VAT returns for you.

Software providers

HMRC has communicated with all software providers that provide XML submission platform for this change and your software provider would communicate with you what are their plan on this migration.

Surcharges and penalties for non compliance with MTD rules

HMRC will issue surcharges and penalties if your business failed to comply with the Making Tax Digital for VAT rules. For example, if you do not use your HMRC Business Tax Account to submit your VAT return and you send in a paper VAT return to HMRC, you will get £400 penalty.

Click here for more information about MTD surcharges and penalties.

Besides, making sure your VAT registered business comply with MTD rules, if your business is a limited company, make sure your confirmation statement and company accounts are submitted by the deadlines to Companies House to avoid a late filing penalty.

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