Making Tax Digital (MTD) preparation and management

From 1st April 2019, HMRC introduced a digital service for VAT records and return submission.  VAT registered businesses with a taxable turnover of more than £85,000 must follow the rules for ‘Making Tax Digital for VAT’ by keeping some records digitally. From 1 April 2022 all VAT registered businesses must sign up, whatever they earn.

Several accounting software have integrated MTD systems for example Xero, QuickBooks and Sage Accounting.

The MTD service makes submitting VAT Returns quick and easy. Incorporating the system into your current accounting software means you can see your VAT situation in real time.

Businesses who use spreadsheets for their VAT records can use a form of bridging software so submit VAT Returns through the MTD service. Many of these are free for smaller businesses.

MTD will be mandatory if you are registered for VAT and your taxable turnover is about the VAT registration threshold (currently £85,000).  From 1 April 2022 all VAT registered businesses must sign up, whatever they earn.

Yes you can still sign up for MTD, HMRC is encouraging business below to sign up, so they can also benefit from MTD. 

MTD does not require you to keep additional records for VAT, but to record them digitally. These should include for each supply, the time of supply (tax point), the value of the supply 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. 

This is HMRC’s description of the digital tool that can take information from other applications, for example, a spreadsheet or an in-house record keeping system, and lets the user send the required information digitally to HMRC in the correct format.