Making Tax Digital (MTD) for VAT

What is MTD for VAT?

Making tax digital (MTD) for VAT requires VAT registered businesses to keep records digitally and file their VAT returns using compatible software.

Compatible software must be capable of:

• recording and preserving digital records; and
• communicating digitally with HMRC through their API platform.

The software can be:

• VAT record-keeping software that updates and stores records digitally and works directly with HMRC; or
• bridging software that works with non-compatible spreadsheets and accounting systems to send and receive VAT information.

All data transfers or exchanges within or between software programs or applications must be made electronically. They must be digitally linked. The use of ‘cut and paste’ or ‘copy and paste’ is not acceptable.

A digital record of the following must be kept, maintained, and preserved in an electronic account:

• the business name, address, VAT registration number and any VAT accounting schemes in use;
• the date, value, and rate of VAT charged on each supply;
• the date, value, and VAT recoverable for each supply received;
• summary data to support each VAT return.

Only supplies recorded as part of your VAT return must be kept digitally, and where information is obtained from a third party – for example, an agent acting on your behalf – a summary document may be treated as a single invoice.

Failure to comply with MTD for VAT can incur penalties.

At Morris Accountancy Services our preferred compatible software is Xero or FreeAgent. Please get in touch to discuss which one would suit you and our pricing.