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What is Making Tax Digital for VAT?

Bolt August 21, 2021

Making Tax Digital for VAT (also known as MTD) is the first step in HMRC’s strategy to bring the UK tax system into a modern digital age. The original plan was to file both personal tax returns and sales tax returns in the new digital MTD system, but these plans have been postponed for now to allow time for the full implementation of the new digital tax filing system. about sales. In the subsequent course, we expect MTD to cover other financial areas. So keep an eye out for updates from HMRC to see what might affect you in the future.

Making Tax Digital for VAT

MTD for VAT is the first step in a new digital tax reporting system being introduced by HMRC.

The most important requirements are:

  • Key records must be digitally kept for VAT purposes
  • You need to use special software that works with MTD. is compatible
  • VAT returns must be submitted to HMRC via this software and not directly via HMRC online.
Making Tax Digital

Timeable for MTD

The first binding date for the entry into force of the Making Tax Digital was for sales tax periods beginning on April 1, 2019. If you file quarterly sales tax returns, the first sales tax period covered by the new MTD rules will apply to the quarter ending June 30, 2019 (since that sales tax quarter began on June 1, 2019). April 2019). To consider another example, if your sales tax quarter ends for February, May, August, and November, your first sales tax quarter in the new MTD system will be the quarter ending August 31, 2019. Some companies will have voluntarily started MTD earlier if they decided to participate in the HMRC pilot, but this was only a very small group of people.

Who should join MTD?

Not everyone has to submit their VAT returns using the new MTD system, some can still use the old VAT refund system. If you are registered for VAT but your taxable sales are below the current VAT registration threshold of £ 85,000, you do not need to join MTD; You can volunteer to join if you wish, but it is not required. However, you will need to continually monitor your taxable income to see if you have exceeded the threshold in any period of 12 months from March 31, 2019; If you ever cross the threshold, you’ll need to sign up for MTD. MTD affects all types of business, whether you are a limited company, sole proprietorship, or partnership, you need to check if MTD affects you and if so, sign up.

Making Tax Digital

How do you set up your Business for MTD?

If you need (or want) to register with MTD, there are two steps you need to take:

1) You should verify that your current accounting software is MTD compliant and if it is not, you should find new software that

2) You must register your company for MTD with HMRC

MTD Compatible Software

If your current accounting system is not Making Tax Digital compliant, you need to find software that will allow your company to digitally keep the necessary records and submit your VAT return to HMRC through the accounting system. This can be done by using modern accounting software or by using what is known as “bridge software” that allows you to connect a non-compliant system (such as Excel) to HMRC.

What does Digital Record Actually Mean?

HMRC has a detailed breakdown of the records that need to be digitally kept at the link below – but essentially, if you choose to use compliant software, the system should do most of the digital records for you

Making Tax Digital

How to Register for MTD with HMRC

To register your company for MTD VAT, follow HMRC policy. Once you have registered, you will receive a confirmation email from HMRC within 72 hours; You do not have to submit your VAT return until you have received the confirmation email. The deadlines for filing the sales tax return and the payment deadlines under the MTD remain the same as in the existing system for filing the sales tax. As soon as you have received the confirmation email, you must activate MTD in your chosen accounting software, and then you can submit your MTD VAT return directly through their system.

Warning! As soon as you have registered with MTD, you will no longer be able to use the old VAT declaration system.

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