Making Tax Digital for VAT

MTD is HM Revenue & Customs’ strategy to modernise the tax system. We are actively involved and keen to work with clients interested in joining the pilot.

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Tom Edwards, Sunil Parmar
Published: 10 Sept 2018 Updated: 13 Jun 2022

What will MTD for VAT involve?

MTD is HM Revenue & Customs’ (HMRC’s) strategy to modernise the tax system. As well as improving HMRC’s own internal systems, MTD involves mandatory digital record keeping and reporting by taxpayers.

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MTD is required for any compulsory VAT registered entity, starting with the return for the first period commencing after 1 April 2019. If the entity is voluntarily registered for VAT they can opt in to MTD or continue to submit VAT returns as they are.

Some businesses may be able to join the MTD for VAT pilot, which started in April 2018. We are actively involved and keen to work with clients interested in joining the pilot or learning from our experience. Clients with simple VAT affairs may be able to join first; those with complex affairs may have to wait until late 2018.

There will be two key requirements for relevant VAT registered businesses:

To maintain digital records to provide a complete digital audit trail to support VAT returns; and
To use MTD compatible software to report VAT data on a VAT return period basis and receive information from HMRC, using an HMRC Application Programming Interface (API).

Other points of interest

  • Taxpayers will be able to opt to provide HMRC with certain additional information. This might reduce the risk of enquiry, but this is not guaranteed so consider this carefully.
  • Limited exemptions are available, including for insolvent businesses, though these may opt into MTD.
  • Certain adjustments, such as partial exemption calculations and fuel scale charges can be made manually although there is still a requirement to enter these adjustments into your software so that they are included on the VAT return.
  • MTD for other business taxes is expected to be mandated, but not before April 2020.

Working with you – how we can help

Do you need to review your accounting software to enable you to comply with MTD? Do you want to make changes before your next annual period of accounts commences?

We can carry out a review of your accounting systems and VAT return processes to identify any gaps between your current VAT compliance process and where it needs to be for MTD. We can work with you to implement changes to ensure your business is ready to submit its returns under MTD by April 2019.

We understand that every business is different. Using our knowledge and experience working with clients, we can advise and implement solutions appropriate for you now and as future proof as possible.

By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.


This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.