MTD for VAT guidance
What a compliant digital VAT process is trying to achieve.
The important question is not merely whether a return was submitted. It is whether the records, transfers and submission form an acceptable digital journey.
Who must follow MTD for VAT?
All VAT-registered businesses should now be within MTD for VAT unless HMRC has confirmed an exemption or an application is awaiting a decision. HMRC automatically signs up new VAT registrations.
Digital records
Specified business, sales, purchase and VAT-summary information must be kept in functional compatible software. Some source documents must still be preserved separately.
Digital links
Where more than one product forms the electronic account, transfers between them must generally be digital. Retyping, writing down or copy-and-paste transfers can indicate a gap. HMRC’s notice explains permitted exceptions and adjustments.
Software and spreadsheets
A spreadsheet can form part of functional compatible software when suitable bridging software provides the MTD API connection and the required digital links are maintained.
Submitting VAT returns
VAT returns must normally be submitted using compatible software. Direct online-account filing is reserved for situations such as confirmed MTD exemption, deregistration or insolvency.
Exemptions
HMRC considers whether digital tools are practical given the business’s circumstances. Age, disability, location, insolvency or religious belief may be relevant. Cost, time or unfamiliarity alone is not normally enough.
Late returns, late payment and errors
Submission points, payment penalties and correcting an earlier VAT return are separate processes. Start with what happened and act promptly.
Your VAT deadlines
Calculate likely return and payment dates from the business’s own VAT period end, then create a personalised non-updating calendar file with preparation reminders.