Phase 2 of the Making Tax Digital (MTD) for VAT will start on 1 April 2021 affecting over one million VAT registered businesses. HMRC is looking to expunge over half a billion pounds
in VAT errors with this phase of digitising VAT reporting.
HMRC will now be imposing full VAT penalties, which had been suspended in late filings
for two years.
In phase 2 the major change is ending of most manual processes in completing the VAT data and return.
All VAT records
i.e. sales, purchases, stock, and fixed asset transactions etc must be maintained in digital
form.
If VAT data is moved between accounting or invoicing systems prior to the digital filing, this may only be done via ‘digital links. Manual cut and paste in spreadsheets or adjustments is strictly forbidden❌ by HMRC.
