Legal requirement for digital records

Making Tax Digital

Making Tax Digital

Making Tax Digital: Get Ready for Online VAT Reporting

We previously wrote about how Making Tax Digital (MTD) will have a big impact on businesses, and HMRC has now released further details regarding the scheme. Find out what this means for your business below.

Who does this apply to?

From April 2019, businesses above the VAT registration threshold of £85,000 will be legally required to create a digital tax account and file quarterly VAT returns online. This legislation will apply to sole traders, companies, LLPs, as well as charities.

Any business that must complete a VAT return but has VAT taxable turnover of less than £85,000 can continue to file their VAT returns through HMRC’s online portal.

Even if businesses don’t meet the VAT registration threshold, they can still opt into MTD and file their VAT returns through the MTD platform.

New requirements

Businesses that will fall under the MTD for VAT initiative will have two main issues to consider. Firstly, records will have to be held digitally. Secondly, businesses will have to have MTD-compatible software.

Digital records

HMRC confirmed that the following records must be kept digitally as part of the new changes:

  • Your business name, the address of your principal place of business, and your VAT registration number;
  • A record of any VAT accounting schemes used;
  • Details regarding supplies you make and receive; and
  • The VAT account, which provides an audit trail that links your business records and VAT return

Compatible Software

Under MTD, the commercial software your business uses must be able to:

  • Keep and preserve records digitally;
  • Create a VAT return from those digital records;
  • Provide VAT data to HMRC on a voluntary basis; and
  • Receive information from HMRC via an Application Programme Interface (API)

We do not currently know which software providers will be compatible with MTD. We also understand that HMRC does not intend to release free software that is compatible with MTD for VAT, so reliance will be on third-party providers to ensure their software is compatible.

HMRC has also launched the live pilot of the MTD platform for VAT, and a small number of eligible businesses have been invited to join the pilot scheme. It is expected that the platform will enter beta testing this summer.

Once that happens, HMRC is expected to publish a list of software providers that will be compatible with MTD. It may be worthwhile to speak to your software provider at that time to ensure that your existing software will be compatible.

Next Steps

Although there is still some time before the MTD for VAT reporting requirements come into effect in April 2019, there are many ways your business can get prepared now for the upcoming changes.

For example, you should review your current systems to see whether they will meet the digital record requirements. This is especially important for the many businesses that currently keep documents physically.

Now is also a great time to review your current software package and see whether your provider expects to be compatible with MTD for VAT. It may also be worthwhile to try and participate in the pilot or beta scheme so that you are fully aware of how the system will roll out.


If your business will be affected by the upcoming MTD for VAT changes, you should take steps to ensure that your business systems are compliant with the new digital record keeping and reporting requirements. These reviews will all come at a cost to your business.

F9 Consulting can help make the transition to Making Tax Digital for VAT easy. Speak to one of our team today to find out how we can help transition your business to be compliant in an efficient and cost-effective way.

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