By Lynne Gowers on 22nd October 2018

Making Tax Digital for VAT – are you ready?

Making Tax Digital

Making Tax Digital, aka MTD, is HMRC’s project to modernise and digitise the tax system by 2020. The first step will be Making Tax Digital for VAT.

The start date for MTD for VAT is fast approaching – from the start of your first VAT accounting period beginning on or after 1 April 2019, if you are a VAT registered business with VATable turnover over the VAT registration threshold of £85,000, you will need to comply with MTD for VAT.

This will mean maintaining digital records and filing the VAT return using MTD-compatible software. Businesses within MTD for VAT will no longer be able to use HMRC’s VAT Online service to file their VAT return. However, you will still be able to use an agent to file your return on your behalf.

Businesses whose VATable turnover is below the registration threshold do not have to join MTD, but can choose to do so if they wish. However, once they are within MTD for VAT, they must remain in it as long as they are VAT registered – there is no going back.

If you have yet to start preparing for MTD for VAT, now is the time to do so.

What does Making Tax Digital for VAT mean for you?

Under MTD for VAT you will need to keep your business records digitally if you do not already do so. If you are already using software to keep your business records, you will need to check that your software supplier plans to introduce MTD-compatible software, and upgrade as necessary.

If you do not currently keep your VAT records digitally you will need to choose software that will enable you to fulfil your MTD for VAT obligations.

It goes without saying that if you are using the Boox accounting app you have no need to worry, and we also support users of Xero, Freeagent, Quickbooks and Sage, all of which are MTD-compatible applications.

MTD-compatible software

MTD-compatible software (also referred to as ‘functional compatible software’) is a software product or set of software products which meet the obligations imposed by MTD for VAT and enable records to be kept digitally and data to be exchanged digitally with HMRC via the MTD service.

Where more than one product is being used, the data flows between the applications must be digital – data cannot be entered manually. However, businesses will be allowed to cut and paste data from one application to another until 31 March 2020, after which all links must be digital.


If you currently use spreadsheets to summarise VAT transactions, calculate VAT or to arrive at the information needed to complete the VAT, once MTD starts, you will be able to continue to do so.

However, you will no longer be able to key the relevant figures into the appropriate boxes on the VAT return. Instead you will need to use MTD-compatible software to let you to send your VAT returns to HMRC and to receive information back from VAT. Bridging software may be used to make spreadsheets MTD-compatible.

However, to comply with MTD for VAT, the data must be transferred digitally – it cannot be re-keyed into another software package. But there will be a transition period and businesses can cut and paste until 31 March 2020, after which all links between products must be digital.

Bridging software

HMRC use the term ‘bridging software’ to mean a digital tool which is able to take information from another application, such as spreadsheets or an in-house system, and allow the user to send the data to HMRC in the correct format.

Time to futureproof your business

MTD for VAT is just the first step in HMRC’s plans to modernise the UK tax system.

Accounting software fits in with the digital future of taxation and brings other clear benefits, automating of lot of the tasks involved with managing your accounts and saving you time.
There’s no better time to ditch the spreadsheets!

You’re welcome to download our free guide – “Choosing the right accounting software”

Lynne Gowers Written by Lynne Gowers

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