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MTD kept simple

Making Tax Digital (MTD) for VAT explained – keeping it simple


What is MTD

MTD for VAT requires VAT registered businesses with taxable turnover above the VAT registration threshold (currently £85,000 per annum) to keep records in digital form and file their VAT returns using compatible software.


When does it start

MTD rules apply from your first VAT period commencing on or after 1 April 2019. A VAT period is the inclusive dates covered by your VAT return.


What is digital record keeping

All VAT registered businesses must currently retain certain records and accounts. Under MTD some of these records must be kept in digital form utilising functional compatible software. Any records not required for your VAT return need not currently be kept digitally.


Which records must be kept digitally

The records listed below must be kept in digital format:
Designatory Data

  • Your business name
  • The address of your principal place of business
  • VAT registration number
  • Any VAT accounting schemes that you use


Supplies made (Sales)
For each supply that you make you must have a digital record of:

  • time of supply (tax point) – essentially this means the date
  • Value of the supply, net of VAT
  • The rate of VAT charged


Supplies received (purchases/expenses)
For each supply that you receive you must have a digital record of:

  • time of supply (tax point)
  • Value of the supply, net of VAT
  • The amount of vat (input tax) to be claimed


What is Functional Compatible Software
This is a software program (or series of software programs) that must be capable of:

  • recording and preserving digital records
  • provide information and returns to HMRC from those digital records using the API
  • platform (HMRC’s Application Programming Interface platform)


It is vital that you check whether your current software is compliant. If you are unsure please contact the team at FourM or your current software provider.


Is it possible to still use spreadsheets for MTD
Yes but……

The submission of information and returns to HMRC must always be via an API interface. Therefore if using spreadsheets to maintain digital records a digital link to API enabled bridging software will be required to submit your VAT return.


If you want to continue using spreadsheets please speak to the team at FourM to ensure that the correct data is recorded and to discuss options for the lodgement of VAT returns.


What if my VAT affairs are complicated
If you are a member of a VAT group or make adjustments to VAT payable or claimable, eg Partial exemption claims, then there are special rules that apply and you should contact the team at FourM for further advice on remaining compliant.


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