Making Tax Digital: VAT – how ready are you?

Making VAT Digital

Making Tax Digital for Businesses will finally arrive on 1 April 2019. From that date, all VAT registered businesses with turnover above the VAT threshold (currently £85,000) will be required to:

  • Maintain digital records (for VAT purposes only)
  • Provide their VAT information to HMRC using third-party commercial software.

This includes:

  • Unincorporated businesses
  • Companies
  • LLPs
  • Charities

VAT registered businesses below the threshold can file their VAT information through MTD if they wish. Initially, there will be no change to the filing or payment deadlines, or to the basic information submitted to HMRC.

Below, we’ll cover the main points you should be aware of with the upcoming changes.


The biggest challenge in the move to a digital system will be the availability of suitable software. The regulations will require any business within the scope for MVD to use ‘functional compatible software’ to meet the new requirements. HMRC have stated they will not provide free software. However, they are working closely with software providers to ensure a wide range of options will be available.

The software you use must be able to:

  • Keep required records in a digital format;
  • Preserve those records in digital form for up to 6 years;
  • Create a VAT return from the digital records;
  • Provide HMRC with this data on a voluntary basis;
  • Receive information from HMRC about the business’ compliance record via the Application Programme Interface (API) platform

Digital records

There will be no requirement to keep supporting documents, such as invoices and receipts, in a digital format. However, businesses will need to store transactional information digitally, including the time and value of each supply, together with the applicable VAT rate. Retailers within the VAT retail schemes will be able to keep a record based on their daily gross takings rather than recording details of individual transactions.

Businesses will still be able to use the flat rate scheme under MTD, meaning digital records of purchase invoices will not be required (unless they relate to capital items which cost more than £2,000 including VAT).

Supplementary data

HMRC has made it clear that there will be no requirement to submit more information than is included on the current VAT return. However, businesses will be able to submit supplementary data voluntarily. They have said that providing extra information will have benefits for business as well as for HMRC itself. This could be the case if the provision of additional information allowed HMRC to deal more effectively with a business’ VAT affairs, but this will depend on details yet to be finalised, and the ease of businesses to submit any additional information.

What you should be doing now

Larger businesses with their own internal IT teams should be liaising with the head of the Finance and Tax Departments to ensure that they are aware of the coming changes and that systems are being developed to cope with these changes.

Smaller businesses should contact their accounting software provider to establish what offering they have and how their package will change to meet the requirement of ‘functional compatible software’.

How we can help

At MHA Carpenter Box, we offer a wide range of services and support to help you become MTD compliant. We can help you find a cloud solution, submit quarterly submissions to HMRC or even provide training for your team.

For more information on Making Tax Digital, please contact our Tax team on 01903 234094.

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