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New guidance published on best time to sign up to MTD for VAT

HMRC has published new guidance on exactly when companies new to MTD for VAT should complete the sign-up process.

All VAT-registered traders must comply with Making Tax Digital for VAT (MTD for VAT) regulations from the beginning of their first VAT accounting period, starting on or after 1 April 2022.

About 750,000 traders are still to sign up, including about 100,000 who should have been complying since 2019. Those that are unable to comply can apply for a digital exclusion exemption.

HMRC has published a guide explaining how to work out the start date for different accounting periods. It also highlights the ‘sweet spot’ for signing up, between the last non-MTD VAT return being filed and the first MTD VAT return being due.

Those that pay by direct debit must sign up at least:

  • Seven days before their first MTD return is due
  • Five days after their last non-MTD return is due

The system is more flexible for those that do not pay by direct debit – who need to sign up at least three days before their first MTD return is due.

Keir Thomas-Bryant, a small business expert and blogger for Sage, warned of the consequences of non-compliance: “If you don’t sign up for MTD for VAT, you’ll no longer have a way to submit a VAT Return. This will mean you’ll miss your VAT filing deadline and will be subject to the new penalty system that begins in January 2023.

“The new penalty system is built around points, and missing a deadline incurs one point. A points threshold is applied, based on how frequently you file returns. Once you pass the points threshold a £200 penalty is automatically applied.”

He added: “It’s worth noting that some people can apply to HMRC to be digitally excluded. This means they won’t have to deal with Making Tax Digital. However, this exclusion is only for exceptional circumstances, and you can’t just opt into it.

“You need a very good reason, such as the fact that the remoteness of your location means you can’t access the internet, or your religious beliefs prohibit you from using a computer.”

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