Independent VAT Consultant
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MTD: Decide whether to deregister for VAT


From April 2022 Making Tax Digital (MTD) will be extended to businesses that are voluntarily registered for VAT. Accountants should discuss the option of deregistration for these businesses as soon as possible.

11th Jun 2021
Independent VAT Consultant
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A business can register for VAT at any time if it is either making or intending to make taxable sales. Many businesses are VAT registered with annual taxable sales that have always been less than the £85,000 compulsory threshold.

Some businesses have no sales for many years but are VAT registered in order to claim input tax. For example, a forester may be waiting for trees to grow so that wood can be sold in the future.

There are two main reasons for voluntary registration:

Input tax recovery

The opportunity to claim input tax on expenses is usually only worthwhile if a business is making zero-rated sales (eg: a bakery selling take-away sandwiches). Voluntary registration also works well for those making positive rated sales to customers that are VAT registered and able to claim input tax  eg: freelance marketing consultant working only for VAT registered businesses.


Having a VAT number sometimes gives extra credibility to a small business – conveying the message that “we are a serious player,”.

Extending MTD to voluntary registrations

MTD will be compulsory for all VAT registrations for periods beginning on 1 April 2022 or later. The MTD regime is being extended to voluntary registrations – and there are a lot of them.

The good news is that HMRC estimates that one-third of voluntarily registered businesses are already MTD compliant. This makes sense because I know that many accounting practices adopted the approach of “MTD for all” a few years ago, knowing that the MTD fishing net would be widened at some stage.

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Replies (3)

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By ireallyshouldknowthisbut
11th Jun 2021 16:14


Give the clients two options: £250+ in software, learn a new system and be compliant,

or have us type in the numbers into excel, bridge software, sorted, and take the (currently only theoretical) risk of a fine.

I am in the business of helping clients pay the right amount of tax not worrying about petty compliance issues.

Thanks (1)
Replying to ireallyshouldknowthisbut:
By Hugo Fair
11th Jun 2021 17:01

You left out of option 1: ... and pay you to review/correct any errors that result from them inputting data to wrong place (or indeed when it shouldn't have been entered in the first place).

Assuming that agents don't swallow the extra hours (after all this is govt policy not an unexpected pandemic), then the cost comparisons will be very unequal.

Mind you, MTD for IT is where the proverbial really hits the rotating blades!

Thanks (1)
Replying to ireallyshouldknowthisbut:
By Paul Crowley
12th Jun 2021 12:03

Tax is about risk when any judgement is involved.
The same could be said about tax penalties on submitting correct VAT returns but which may not comply with the required method of compilation.
Two still filing the old way have just deregistered, having ceased trade.
I now only have one left that we submit who exports outside of EU.
Not checked recently but we will still have some volunteers that still file the old way and will discuss between now and then

Thanks (0)