Making Tax Digital for VAT – Frequently Asked Questions

What is Making Tax Digital and when is it being introduced?

Making Tax Digital is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right more efficiently.

MTD for VAT (MTDV) will be Mandatory for VAT registered businesses with >£85,000 annual turnover (excluding any VAT exempt income). It is estimated that 96.5% of mandated businesses will be required to submit VAT returns electronically for returns starting on or after 1 April 2019 (first digital quarterly VAT returns are due for submission by 7 August 2019).

However, MTD for VAT has been deferred for a few ‘complex’ businesses until 1 October 2019 – these include;

  • Trusts
  • Not for Profit organisations not set up as a company
  • VAT groups
  • Annual Accounting scheme users
  • Tax payers making payments on account
  • Other more restricted exceptions

Will my current Accounting Software be MTDV compliant?

Many of the larger software developers such as Quickbooks, Xero, Sage and SAP have developed their own digital solution to ensure MTDV compliance.  However, we can confirm that all packages will have to be MTDV compliant and would therefore recommend that you contact your software supplier to check if their product will be compliant or not, by 1 April 2019.  If your service supplier’s product isn’t compliant, you will need to consider using bridging software in the interim.

What if I use spreadsheets to prepare my VAT returns (e.g for a partial exemption calculation)?

Smaller businesses which are not using accounting software (and use spreadsheets) and larger businesses that perhaps use a number of systems that are brought together on a spreadsheet, will not be automatically compliant with MTDV.

In such instances ‘bridging software’ will be necessary to link spreadsheets into digital format that allows the 9 boxes of a VAT return to be digitally submitted to HMRC without manual intervention. In most cases the bridging software will be a simple add on to existing excel software that will allow the program to communicate directly with HMRC and upload the data that would typically be input manually through HMRC’s portal.

Where do I get bridging software?

HMRC have produced a list of commercial providers and we will have a solution to deliver bridging software before the key implementation date. Other commercial providers will also be available.

Once I have installed bridging software, can I continue to use spreadsheets indefinitely?

You will be permitted to use spreadsheets and bridging software in the near future to ensure that changes can be adopted with as little disruption to your business as possible. However, there will be a requirement to transition to a fully integrated MTDV digital software program by 1 April 2020.

What should I do if I have questions?

Speak to your accounting software provider or contact the Making Tax Digital team at Henderson Loggie: