Making Tax Digital for VAT means that VAT-registered businesses keep their records digitally and file their VAT returns using compatible software. It began for larger businesses in 2019, and since April 2022 it has applied to every VAT-registered business, whatever its turnover. This is general information, so check GOV.UK for details.
What it requires
- Digital records: keep certain VAT records in digital form, such as sales, purchases and the VAT on each.
- Software filing: send your VAT return to HMRC from compatible software. You can no longer type the figures into HMRC’s online form.
- Digital links: where you use more than one piece of software or a spreadsheet, the figures must move between them digitally, not by retyping.
Which records you must keep
- Your business name, address and VAT registration number.
- The VAT scheme you use.
- For each supply you make: the time of supply, the value and the rate of VAT.
- For each supply you receive: the time of supply and the value, and the VAT you can reclaim.
- Adjustments, such as bad debt relief and credit notes.
Can I use spreadsheets?
Yes, if the spreadsheet is linked to HMRC through compatible software that is often called bridging software. Copying and pasting between files does not meet the digital links rule. Many businesses find it simpler to keep everything in accounting software.
Deadlines
The VAT return and the payment are normally due one month and seven days after the end of the period. See our checklist for the return due on 7 November.
Penalties
HMRC uses a points-based system for late VAT returns: each late return earns a point, and when you reach the threshold you receive a financial penalty. Late payment penalties and interest increase the longer a payment is outstanding. Check GOV.UK for current thresholds.
Exemptions
A small number of businesses are exempt, for example on religious grounds or if digital filing is not possible. You must ask HMRC and be granted it.
Steps to comply
- Choose compatible software. See how to choose Making Tax Digital software.
- Sign up with HMRC and authorise your software.
- Move your VAT records into the software.
- Review your return, submit it and pay on time.
How AvrioBooks helps
Record sales and purchases with the right tax rate, and prepare your VAT return from your books. Making Tax Digital for VAT is available on the Standard plan and above, subject to HMRC approval. See VAT software.
Frequently asked questions
Who must use Making Tax Digital for VAT?
Every VAT-registered business, whatever its turnover, since April 2022.
Can I still file VAT returns on the HMRC website?
No. Returns must be filed from compatible software.
What are digital links?
A requirement that figures move between software and spreadsheets digitally, not by retyping or copying and pasting.
Does AvrioBooks support it?
Yes, on the Standard plan and above, subject to HMRC approval.
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