What the HMRC Making Tax Digital for VAT emails and letters mean for your business

Have you received an email or letter from HMRC about Making Tax Digital for VAT?

If you have, you’re not alone.

HMRC is sending a series of Making Tax Digital (MTD) for VAT emails and letters to eligible VAT-registered businesses.

This is to let them know that the way VAT records are kept and VAT Returns are submitted has changed, and that they need to start following MTD for VAT now.

However, if your business hasn’t received one yet, that’s not to say it won’t.

Read this article to find out about the benefits of Making Tax Digital, what HMRC’s communications mean for you, and what steps you should take next.

Here’s what we cover:

• Why Making Tax Digital will benefit your business
• Why has my business received an email or letter from HMRC?
• What do the emails and letters (and Making Tax Digital) mean for me?
• What happens if I’ve not received anything from HMRC?
• What do the HMRC Making Tax Digital emails and letters say?
• Key dates to be aware of
• Where you can get help preparing for MTD
• Final thoughts on Making Tax Digital

Why Making Tax Digital will benefit your business

Making Tax Digital is one of the most important changes to UK businesses ever.

Not only does it help to reduce errors when it comes to dealing with business admin, it enhances productivity for your company too.

Spending less time on admin so you can focus on your business is important – by moving to digital accounting, businesses can save an average of £17,000/27.6 days per year, according to research by Sage.

Why has my business received an email or letter from HMRC?

If your business has received one of the MTD for VAT emails or letters from HMRC, it’s because you need to start keeping digital records and change the way you submit your VAT.

The contents provide you with a series of steps that need to be taken so your business is following the MTD for VAT rules.

In the words of one piece of communication from HMRC, it says:

“Even if you already use software to keep your records and file your VAT returns online, don’t forget you must sign up for MTD before you file your next return.”

What do the emails and letters (and Making Tax Digital) mean for me?

It means that since 1 April 2022, the way all VAT-registered businesses keep their records and submit VAT returns changed.

Now, HMRC requires your business to keep records digitally, while the submission of VAT data needs to be done via MTD compatible software or bridging software.

What happens if I’ve not received anything from HMRC?

HMRC will be sending out more emails and letters to businesses, so there’s a chance you’ll receive one if your business is VAT registered and you’ve not already signed up for MTD for VAT.

However, you don’t have to wait to receive an email or letter from HMRC to start using MTD for VAT – you can sign up for it now.

What do the HMRC Making Tax Digital emails and letters say?

They begin by telling you that you need to take action to get ready for Making Tax Digital.

They state that all VAT-registered businesses need to sign up for MTD for VAT, regardless of taxable turnover.

Next, they cover a series of steps for you to take (the emails and letters go into more detail):

• You need MTD compatible software or bridging software

• You must use your software to keep your digital records

• You should go to the Gov.uk website so you can sign up for MTD for VAT

• You have to allow your software to work with MTD, then you can start submitting your VAT Returns using MTD.

They also warn that if you don’t start using MTD before your first MTD for VAT return deadline (your specific deadline should be on your email or letter), there’s a chance you’ll be penalised.

Additionally, there’s a reference to MTD exemptions (find out more at Gov.uk), and a note pointing out that if you use an accountant or agent to help you manage your business taxes, they can support your move to MTD for VAT.

Key dates to be aware of

Making Tax Digital is mandated for all VAT-registered businesses as of 1 April 2022, but what other dates must you keep in mind?

Well, that depends on when your first full VAT period starts on or after this date.

If you are a business with the standard quarterly VAT accounting periods, you must keep digital records and submit your VAT Return through MTD from the following start dates:

• 1 April 2022: If the previous VAT quarter ended on 31 March 2022.
• 1 May 2022: If the previous VAT quarter ended on 30 April 2022.
• 1 June 2022: If the previous VAT quarter ended on 31 May 2022.

The same logic applies to monthly and annual VAT accounting periods, so keep in mind when your first full VAT accounting periods begins.

And since there’s still a need to file VAT Returns by one calendar month and seven days, at the latest, this means the initial VAT Returns for MTD for VAT must be filed by the following:

• 7 August 2022 for a VAT quarter beginning 1 April 2022.
• 7 September 2022 for a VAT quarter beginning 1 May 2022.
• 7 October 2022 for a VAT quarter beginning 1 June 2022.

There are also deadlines to register for MTD for VAT to keep in mind.  

If you already pay by Direct Debit, don’t sign up too close to the date your VAT Return is due or you may pay twice.

To avoid this, make sure you don’t sign up less than:

• Seven days before your return is due
• Five days after your return is due

And if you don’t pay by Direct Debit, make sure you sign up at least three days before the due date for your VAT Return.

Where you can get help preparing for MTD

To help you with your preparations for Making Tax Digital, HMRC’s emails and letters cover a few sources that will provide you with the support required to make the move to MTD for VAT a smooth one.

They include general information on Making Tax Digital and details on digital record keeping (sales and purchase records must be kept digitally, while invoices still need to be retained for at least six years).

In addition, at Sage, we’ve created a Making Tax Digital Hub, which has answers to questions you may have about MTD for VAT, and you can sign up for a webinar to guide you along the way.

There’s also information to help you make sure you have MTD compatible software, so you can manage and submit your VAT Returns in the correct way.

And we’ve put together the following MTD for VAT articles, so you can make the move to all things digital a breeze:

• Making Tax Digital for VAT checklist: How to get up to speed with MTD for VAT
• How to register for Making Tax Digital for VAT
• Step by step guide to Making Tax Digital for VAT
• Making Tax Digital for VAT: 6 simple tips to get your business ready
• Making Tax Digital for VAT deadlines

Final thoughts on Making Tax Digital

Moving to Making Tax Digital for VAT might seem like a chore – one more thing to worry about, on top of all of the other challenges you have to face with your business.

However, it will make a real difference to the way you manage your business admin. In addition, having clarity on your business finances and the tax you owe will mean you can manage your money more effectively.

The same goes for keeping digital records – the days of searching for paper documents or filing them in a cabinet will be over.

Having easy access to everything via a few clicks of your computer or mobile phone will mean you save time – and reduce a lot of stress too.