If your Limited company is voluntarily VAT registered – meaning your turnover is less than the £85,000 annual threshold for compulsory registration but you’ve decided to register voluntarily – you don’t currently need to comply with the Making Tax Digital rules. This will change in April 2022, when MTD for VAT will be extended to include all VAT registered businesses. In this article we’ll look at what that could mean for your Limited company.
If your Limited company falls under the MTD rules:
Making Tax Digital is a long-term project that will eventually change how UK taxpayers and businesses interact with HMRC and pay their taxes. HMRC’s ambition is to “become one of the most digitally advanced tax administrations in the world” which means making fundamental changes to the way our tax system works. This process has started with MTD for VAT.
Vat-registered businesses with a taxable turnover above the VAT threshold of £85,000 must already comply with the new regulations. If your company is VAT registered and your turnover is less than £85,000, you will have to comply from April 2022. This will mean:
You must keep digital accounting records.
These will include:
Your business name, address and VAT registration number
Any VAT accounting schemes you use
The VAT on goods and services you supply, for example everything you sell, lease, transfer or hire out (supplies made)
The VAT on goods and services you receive, for example everything you buy, lease, rent or hire (supplies received)
Any adjustments you make to a return
The ‘time of supply’ and ‘value of supply’ (value excluding VAT) for everything you buy and sell
The rate of VAT charged on goods and services you supply
Reverse charge transactions - where you record the VAT on both the sale price and the purchase price of goods and services you buy
items you can reclaim VAT on if you use the Flat Rate Scheme
You must add all your transactions to your digital records, but you don’t necessarily need to scan paper records, like invoices or receipts.
You must submit your VAT return digitally using compatible software.
The deadlines for submitting your VAT returns will not change, you will simply be required to submit them digitally using compatible software. HMRC’s list of compatible software can be found here>>
Orange Genie Accountancy Clients
If you’re lucky enough to be a client of Orange Genie Accountancy, you’ll already be complying with the rules, and you won’t have to change the way you work. Our clients already keep the required digital records and submit returns to HMRC using either FreeAgent or Xero, both of which are fully compliant. Of course, if you’re unsure about how MTD will affect your business and you have questions about it, your Orange Genie Accountant will be more than happy to help.
If you have questions or if we can help in any way, please call our expert team on 01296 468483 or email info@orangegenie.com
If you aren't with Orange Genie Accountancy
If you are not yet a client of Orange Genie Accountancy and if you have any questions or concerns, just contact Orange Genie accountant who will be more than happy to help. You can request a call back>> or call us on 01296 468 483