HMRC takes the first step on a journey to digital compliance. The introduction of Making Tax Digital for VAT (MTD) requires taxpayers to maintain records, and submit VAT Returns digitally.

Making Tax Digital

The UK has introduced MTD in April 2019 to create a modern, streamlined digital tax system making it easier for businesses to file their VAT returns, get their tax right. It also reduces the administrative burden on the UK tax authority Her Majesty’s Revenue and Customs (HMRC), as it aims to become one of the most digitally advanced tax administrations in the world.  

Currently, MTD is mandatory for businesses registered in UK with gross sales revenue exceeding £85,000. HMRC has since extended the MTD platform to cover all UK VAT registered businesses from 1 April 2022, so that it can focus on Brexit.

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Mandate quick facts

  • MTD requires every VAT registered business to record and submit VAT returns electronically
  • The format is a 9-box summary that needs to be filed via the HMRC’s JSON API platform, and which must be digitally linked between the customer’s source data and the digital return being submitted. Businesses will receive as well as send information to HMRC via API
  • Each business in scope must set up a new digital tax account and should follow a new authentication process
  • Digital records can be submitted in a range of digital formats, including XML, CSV, and Excel, provided they are API enabled

Mandate rollout dates

  • 1 April 2019: MTD applies to any businesses that HMRC has not advised in writing are eligible for deferral, and who have not successfully applied for an exemption.  VAT return periods starting on or after 1 April 2019 must be submitted via MTD 

  • 1 October 2019: MTD applies for businesses eligible for deferral.  VAT return periods starting on or after 1 October 2019 must be submitted via MTD 

  • 1 April 2021: The “soft landing” for digital links ends. Starting with that tax period, all MTD users must meet digital link requirements

Penalties

  • A default surcharge of up to 15% of any VAT due that is paid late 

  • Up to 100% of any VAT understated or over-claimed if a VAT return contains a careless or deliberate inaccuracy

  • Up to 30% of an understated assessment of VAT due if HMRC isn’t informed within 30 days that it’s incorrect

  • £400 for submitting a paper VAT return without an exemption  

MTD is only the first step. Do you need help to ensure your UK business stays compliant?

HMRC aims to become one of the most digitally advanced tax administrations in the world and MTD for VAT is a beginning. 

We can empower you to tackle the most complex VAT reporting requirements now and into the future. 

Sovos provides VAT reporting technology that is fully compliant with MTD, including digital link. Discover more.