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Making Tax Digital for VAT: re-examining the key points

Making Tax Digital for VAT (MTD for VAT) is up and running. Most VAT-registered businesses with taxable annual turnover above £85,000 will now be signed up to HMRC’s new system. This requires digital records to be kept, and VAT returns to be filed using MTD for VAT-compliant software. As the system beds in, there are some key points to remember.

Deferred businesses

MTD for VAT is still being rolled out for some businesses. The start date was deferred for trusts, not-for-profit organisations not set up as companies, VAT divisions and VAT groups, and some other businesses. HMRC should have notified these businesses of their deferral directly, but MTD for VAT rules apply for the first VAT return period starting on or after 1 October 2019. 

Looking ahead

Businesses submitting returns should be aware that, as an online service, MTD for VAT is subject to occasional downtime. Downtime should usually be flagged up in advance and service availability can be checked here: bit.ly/2lZKdGl. If filing your own VAT return, it would be prudent not to leave this until the last minute.

HMRC has made concessions regarding digital record keeping for the initial stage of the new regime, known as the ‘soft-landing’ period. This means that the requirement for digital links joining all parts of a business’s functional compatible software is eased for the first year of mandation. The use of cut and paste, or copy and paste, is also permitted instead of a digital link, but only within this period. Requirements are explained under Point 4 in VAT Notice 700/22: bit.ly/2ktXC95.

Businesses taking advantage of the soft-landing period need to be confident that they can transition to full digital competence in 2020. We would be happy to advise further.