Making Tax Digital (MTD) Update – VAT Specific

The government’s much-publicised plans for Making Tax Digital for Business (MTDfB) are taking a slower approach, giving businesses longer to get ready for change.

What is Making Tax Digital?

Making Tax Digital (MTD) is a key part of the government’s plans enabling every individual and business to have access to their own personalised digital tax account, which is being regularly expanded and improved. As part of plans to simplify the administration of the UK tax system, HM Revenue & Customs (HMRC) released six consultation documents outlining how they intend on using digital technology to achieve them. However following the general election this year, ministers decided to take a slower approach to MTD.

Who is affected first?

From April 2019, MTD will be enforced for VAT registered businesses with a turnover above the threshold, for VAT registration which is currently £85k. There will be no other roll out, in terms of Income tax, before April 2020. However, for those that want to be proactive, HMRC is accepting unincorporated businesses and landlords into a MTD pilot scheme for Income tax as of summer 2017.

Deadlines for VAT submission to HMRC will not change, for example, businesses with a VAT quarter ending 31 March will be required to submit their return by 7 May. There will still be 9 boxes on your VAT return which will need to be completed.

Businesses qualifying for MTD with a year end of 31 March will be required to prepare and submit their VAT returns from 1 April 2019, using the MTD format.

How do I comply?

VAT records will need to be prepared and submitted on MTD approved software or spreadsheets in conjunction with other software, for submission, in order to meet full MTD requirements.

Free software may be provided by HMRC to those businesses that meet the following requirements:

  • No VAT liability
  • Cash accounting basis used
  • No employees
  • Unincorporated

Alternatively, businesses will need to contact their software providers to ensure that the software they are currently using will be MTD compatible by April 2019.

For businesses that are voluntarily registered for VAT with a turnover below the VAT threshold, they will continue to have access to the HMRC portal to submit their VAT returns and have the option of not complying with MTD for VAT purposes from April 2019. Businesses that qualify for MTD will no longer have access to the HMRC portal to submit their VAT returns.

If you’re considering changing your accounting software or currently use a manual system you will need to check your chosen method will meet MTD requirements. If you would like any help with these changes, please contact us or call 01743 273273 and we will call you back. 


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