HMRC: Making Tax Digital (MTD) for VAT

Making Tax Digital (MTD) is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs.

Making Tax Digital (MTD) for VAT requires VAT registered business with a taxable turnover above the VAT registration threshold (currently £85,000) to keep digital VAT business records and send returns using Making Tax Digital (MTD) - compatible software. The vast majority of businesses will need to do this for VAT periods starting on or after 1 April 2019.

VAT-registered businesses with a taxable turnover below £85,000 will be required to follow Making Tax digital rules for their first return starting on or after April 2022.

VAT records for Making Tax Digital

MTD does not require you to keep additional records for VAT, but to record them digitally. You must add all your transactions to your digital records, but you do not need to scan paper records like invoices or receipts.

Your digital records should include, for each supply, the time of supply (tax point), the value of the supply (net excluding VAT) and the rate of VAT charged. They should also include information about your business, including business name and principle business address, as well as your VAT registration number and details of any VAT accounting schemes you use.

MTD - compatible software

You need to use a compatible software package or other software (like spreadsheets) that connect to HMRC systems. You must have links between the software you use by your first VAT period after 1 April 2021. Using software will allow you to submit VAT Returns directly to HMRC without needing to visit HMRC’s website.

Compatible software is a software which businesses use must be capable of keeping and maintaining the records specified in the regulations, preparing their VAT Returns using the information maintained in those digital records and communicating with HMRC digitally via our Application Programming Interface (API) platform.

If in doubt, businesses should discuss with their agent or software provider.

We are partners with Sage and the software is compatible with Making Tax Digital for VAT and let us to submit returns for our clients as a tax agent firm.

More information about Making Tax Digital for VAT and when you need to join, you can find on GOV.UK website.