Making Tax Digital Extended To VAT Registered Businesses Under the Threshold
Updated 1st October 2021
Currently only VAT registered businesses making taxable supplies in excess of the £85,000 VAT registration threshold are mandated to comply with Making Tax Digital (MTD) rules. Those rules require the business to keep digital business records and send VAT returns using MTD-compatible software.
MTD for VAT is now being rolled out to all VAT registered businesses from April 2022 which may cause some traders who are VAT registered but below the threshold to consider deregistering to avoid having to comply with MTD for VAT. If you decide to do so you will need to complete Form VAT7 and account for output VAT on the market value of stock and assets still owned at the date of deregistration. This is where input VAT has been reclaimed on those assets.
There is however a £1,000 de-minimis which means that output VAT does not need to be accounted for where the combined market value of the assets is less than £6,000.
Unfortunately, deregistering for VAT will not necessarily sidestep MTD as the requirement to keep business records digitally will be introduced for income tax from April 2024. From then MTD for income tax will apply to businesses with gross income in excess of £10,000 a year which will include property landlords as well as traders and professionals. The start date for partnerships to join MTD for ITSA has been put back still further to the tax year beginning in April 2025.
What should I do about MTD?
Talk to us - the good news is that you can reduce your running costs and streamline your accounting by complying with the new rules!
In the last three years we have worked with many other clients to help them comply with MTD and streamline the way they do things.
Rawcliffe & Co were the Fylde Coast’s FIRST Xero Cloud Accounting Platinum Partner!
For the unconverted Xero is an MTD- compatible, cloud-based accounting platform that allows you to look at your accounts at any time from any device. It facilitates the accessing of real-time data and the streamlining and automation of processes. This allows you to focus on developing your business and your Accountant to interpret important financial data and really drive growth. ,
Read Xero Migration: Rawcliffe's Steps to Implementation which outlines the process for switching your bookkeeping systems over to Xero Cloud Accounting.
Please contact us about helping you to comply with the new rules. We are cloud accounting specialists, and we can train and support you with the right software.
The Rawcliffe & Co team is available via phone or email Monday to Thursday 9-5pm and 9 – 4:30pm on Fridays.
Tel: 01253 798812
Email: info@rawcliffeco.com