Making Tax Digital

From April 1st 2019 ‘MTD’ changes the way VAT returns are filed. Many UK businesses will have to change how they prepare and file VAT returns. 


For those affected by MTD 


  • HMRC’s online VAT portal will close
  • VAT returns must be submitted to HMRC through MTD software
  • Businesses must digitally record their VAT transactions 
  • If a business is VAT registered voluntarily (turnover below £85,000) it will have an extra year to comply with MTD.


MTD Software 

The list of MTD software is found at https://www.gov.uk/guidance/software-for-sending-income-tax-updates#VAT


An MTD ‘End to End’ software product is one that holds all the source digital records and also produces MTD VAT return. Importantly software that is not on the list may still be used so long as ‘Bridging’ software is introduced to produce the MTD VAT return. All the popular cloud accounting products are MTD ‘End to End’ products.


Thinking Ahead for Corporation Tax

When choosing between ‘End to End’ software and ‘Bridging’ software a business should also take into consideration that in April 2020 at the earliest, MTD for Corporation Tax is to be introduced. The Corporation Tax requirements are expected to be similar to MTD for VAT requirements. 


Digital Records & Digital Links

MTD requires that records are kept digitally within the software. Section 3 of VAT Notice 700/22 explains the digital records that must be stored. It is important that each business does an MTD check of the record keeping process and understands how adjustments are made.


Where data is moved from one software to another there must be a digital link. A number of processes are accepted as being a digital link by HMRC however actions such as ‘cut and paste’ does not qualify.


Time is short 

The 1st April 2019 does not allow much time to prepare for MTD. If not already MTD compliant then:


  • Read VAT notice 700/22 and check that your record keeping process complies
  • Check that your software provider is on HMRC’s MTD list
  • Speak to an Accountant with VAT experience