Making Tax Digital for VAT: What you need to know ahead of April 2019

What does Making Tax Digital for VAT mean in practice?

In this short video Alan Davis, VAT Partner here at Henderson Loggie, shares with you some recent updates on Making Tax Digital and the implications this will have on VAT registered companies.

Covered in this video:

► Who will be affected by MTD?
► How much will the MTD changes cost?
► What do you need to do about it now?

If you have any VAT questions about Making Tax Digital, please drop them into the comments section or contact Alan directly at

What does Making Tax Digital mean for VAT in practice?

Well, it’s the Government’s attempt to digitise the submission of VAT returns and information, and what that means is that, rather than gathering together the details for VAT return manually and on spreadsheet, and all the accounting records separately, all these would be linked digitally, and then submitted digitally to the Revenue and Customs with really the aim of improving the accuracy of submissions that they receive.

This will affect all VAT registered businesses in the UK. That’s about 2.3 million traders, and they’ve got until the 31st of March 2019 to make sure that they’ve got their systems ready to adapt to this change.

What software is available for Making Tax Digital?

For most taxpayers who are operating on a fairly standard accounting package (for example, Sage or Xero) it’s expected that the providers will adapt their software to take account of these digital changes. However, for larger businesses that may have two or three accounting systems that merge and are brought together at head office, for example, or use quite a lot of spreadsheets to gather information, there will be a need to digitise the process of gathering all that information into one place to then submit a VAT return, and that will require software that’s only currently being developed.

How much will Making Tax Digital cost?

Many clients have been asking how much the change will cost. Revenue and Customs estimate that it will cost very little, most clients think that it will cost a lot more. It’s unclear at this stage how much more Sage and Xero and providers like that will charge in addition to their normal charges, but it’s clear that there will be an additional cost, that software will need to be procured, and that won’t be free. And certainly Customs have said they won’t provide any software themselves.

The proposed system is different from the current system because, while it’s currently calculating a VAT return and then going to the internet, going to the HMRC website and submitting numbers through there, there will be an electronic portal that your software system will talk to, and there will be no manual intervention in submitting a VAT return.

What is the benefit of Making Tax Digital?

As taxpayers, Customs would argue that the benefit is that there’s less room for error. The real benefit is that Customs get more accurate data, and if you kind of gaze away into the future a bit more, it’s not difficult to see that the software systems that are in play will start to deliver more and more information, and directly to the Revenue’s portal, and they’ll start to mine that information to measure risk. They say that on the basis that the more information you provide, the better it is for them, and the less chance you’ve got to get an inspection.

What is the deadline for Making Tax Digital?

HMRC have yet to announce that software providers have actually provided software that meets their conditions, so there is a bit of a timeline running now. They’ve always said that the April 2019 deadline is fixed, so that around 60 software providers are trying to develop that now, and run that into the pilot.

What do you need to do about Making Tax Digital now?

Well, currently, we’re enrolling a couple of clients from each of our four Scottish offices into the pilot with Customs, with a view to getting that kind of insight into how the system will work. But for others, it’s more like that you need to be aware of the change. You need to be thinking about who currently provides your software. Maybe go back to them and ask them what they’re planning to do in terms of Making Tax Digital. And if their answer is “we don’t really know,” then maybe the opportunity is there for you to push them on a bit, or to start looking at potential other providers.

And, by all means, come back to us. We’ll be monitoring as providers come into the marketplace, we’ll be seeing their products, and judging whether they meet our clients’ needs.

Any questions about Making Tax Digital for VAT?

So, Making Tax Digital for VAT isn’t going away. There’s a deadline. It’s the 31st of March 2019. Clearly, we’ll be working with clients to help them through that journey to comply with the digitisation of VAT. We’ll be helping them with software, and as the deadline approaches, we’ll share best practice when it comes to compliance.

If you have any VAT questions about Making Tax Digital, feel free to contact me directly at

The information is this video is of a general nature and seeks to highlight some of the issues which could be affecting you and/or your business, including changes to financial regulation and legislation. Viewers should not rely on this information without seeking professional advice on its application in their circumstances.