Making Tax Digital (MTD) for VAT Phase II

Is your organisation prepared for Phase II of Making Tax Digital which is coming into place from 1 April 2021? Making Tax Digital is already mandatory for all VAT-registered businesses, now Phase II of MTD ‘Digital Links’ is mandatory from 1 April 2021. FTI Consulting have summarised the changing regulations and the common misconceptions which businesses have around MTD for VAT.

Making Tax Digital is already mandatory for all VAT-registered businesses with a taxable turnover above the VAT threshold (£85,000) requiring you to keep digital records and use software to submit your VAT returns.  Now Phase II of Making Tax Digital ‘Digital Links’ is mandatory from 1 April 2021 for all VAT registered businesses, and will mean that all of an organisation’s data must be digitally linked (rather than rekeyed or copy and pasted). However our review of the market shows that 90% of businesses are currently not fully compliant. 

Non-compliance has potentially significant impacts: VAT filings will be technically invalid, companies subject to the Senior Accounting Office regulations will need to make a disclosure, and we expect Auditors and HMRC Inspectors to require confirmation that Digital Links are in place on all audits going forward. Therefore Finance, Compliance and Tax teams should ensure that they are aware of the changing requirements and take early action to ensure that they meet these requirements.
We have prepared a short summary of the changing regulations and the common misconceptions which businesses have around MTD for VAT, in our short guidance document here.

For further guidance please contact Richard Turner (Tel: +44 (0) 20 3727 1506) or visit FTI Consulting and N-Site. 

Last Reviewed: March 2021

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