In 2021, there are changes coming online for VAT reporting that you should be aware of. We take you through a rundown of the key changes that affect VAT reporting in the UK.

As always, this article is intended to inform you of changes. The content should not be taken as advice. Should you require further guidance, you should contact HMRC here.

Brexit changes to VAT reporting

The UK continues to apply VAT rules on domestic transactions in the same way as before 1st January 2021. There are some changes that have now come into effect that impact transactions between the UK and EU member states.

2021 changes to import VAT

On 1st January 2021, the government introduced a new model for the way VAT applies to goods imported into Great Britain from outside of the UK.

Why is this changing?

HMRC’s policy paper says, “ This will ensure that goods from EU and non-EU countries are treated in the same way and that UK businesses are not disadvantaged by competition from VAT free imports. It will also improve the effectiveness of VAT collection on imported goods and address the problem of overseas sellers failing to pay the right amount of VAT on sales of goods that are already in the UK at the point of sale.”

How the 2021 changes to VAT reporting affect Making Tax Digital

There are a number of changes coming into effect in 2021 for MTD for VAT.

Making Tax Digital solutions from BTCSoftware

Selling from overseas

For overseas sellers affected by the 2021 changes to VAT reporting, there is a further implication on their systems, as any VAT charges must be accounted under Making Tax Digital rules. Although many overseas sellers joined MTD for VAT in October 2019, the change to import VAT rules may affect further businesses selling to UK customers.

Soft landing period ends

Businesses who have already joined MTD for VAT – those with a taxable turnover above the VAT threshold – were given an extension to the end of the soft landing period to help them deal with the impact of Coronavirus. The extension of the soft landing period expires in April this year, and there’s no hint of a further extension, so businesses need to have their digital links fully implemented by then.

Small businesses join

From April 2021, all VAT registered businesses will begin joining MTD for VAT ahead of mandation in April 2022. That’s because HMRC will use this year to move VAT records from the old system, which allowed XML filing, to the MTD database.

Your next steps

How you proceed with 2021 changes to VAT reporting depends on whether you’re a business or an accountant.

Businesses who do their own VAT

If your businesses has already joined MTD for VAT, you will have to ensure that your digital links are in place and fully working by the end of the soft landing period. Whether you use bookkeeping software or Excel to keep digital records, a bridging software like BTCHub allows you to create digital links that are compliant with HMRC rules.

Accountants with small business clients

Your small business clients below the VAT threshold are likely to be affected by the switch of database systems at HMRC. Preparing them early for digital record keeping will set you and them up to make the switch to MTD as seamlessly as possible. Don’t forget that you can use bridging software to remove the burden of costs associated with updating bookkeeping systems.

Find out more

You can see our Making Tax Digital page and find out more about our bridging software here.

Or, get in touch with our team on 0345 241 5030. You can also email

Book a Free Demo
Show Buttons
Share On Facebook
Share On Twitter
Share On Linkedin
Hide Buttons