Making Tax Digital for VAT registered businesses

Making Tax Digital for VAT registered businesses

In 2015 the government first announced its vision to make tax digital. The reason for the change was that it would reduce errors in reporting and would make it easier and simpler for businesses.


The first change in the Making Tax Digital (MTD) plan will be introduced in April 2019. All VAT registered businesses (including self-employed and landlords) with turnover above the VAT registration threshold (currently £85,000) will have to keep their VAT records digitally. They will also have to use MTD compatible software to submit their tax returns.

What type of businesses does this include?

The main criteria are businesses with a turnover of £85,000 and above. Once they start to submit VAT returns using the MTD software they need to continue even if their turnover falls. The types of business entities included are:

  • Sole Traders
  • Limited Companies
  • Partnerships
  • LLPs
  • Trusts
  • Charities

As well as non-UK businesses that are registered for UK VAT.

Businesses with a lower turnover can make the transition to MTD for VAT in April 2019 if they want to; however there is no obligation to do this.

What does this mean for your business?

There is currently a pilot scheme underway to test the software that will be used. You can ask your accountant or bookkeeper to set up the best software for your business, or you can do this yourself. Read our blog  Making Tax Digital Software for more information

The following information will need to be kept digitally:

  • Business name, place of business and VAT registration number
  • The VAT account with an audit trail between primary records and the VAT return
  • Details about expenditures/supplies made and received

These digital records will need to be preserved for up to six years, so it’s essential to ensure that any bespoke software has a good backup system.

Most importantly VAT returns must be submitted to HMRC by means of a business’s functional compatible software communicating digitally via HMRC’s API platform, and not by manually entering the VAT return figures onto the HMRC portal. This is to reduce errors in VAT returns and also to speed up the process.

If your business is preparing for Making Tax Digital for VAT and you would like some more advice, please do contact us by calling 0115 956 9452 or email This email address is being protected from spambots. You need JavaScript enabled to view it.

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