Making Digital (MTD) is HMRC’s most ambitious initiative to make it easier for individuals and businesses to get their tax right. MTD signifies a paradigm shift towards changing the functioning of the tax system, making it more effective & efficient, as well as easier for taxpayers to get their tax right. HMRC’s ambitious Making Tax Digital (MTD) focuses on VAT and imposes new requirements on some VAT registered businesses and organisations. This includes unincorporated businesses, partnerships, companies, LLPs, trusts, non-UK businesses registered for UK VAT and charities.

From April 2019, VAT registered businesses and organisations with taxable turnover above the VAT threshold of £85,000 are required to:

  • Maintain accounting records digitally in a software product or spreadsheet. As a result, maintaining paper records has ceased to meet the legal requirements in tax legislation.
  • Submit VAT returns to HMRC using a compatible software product that can access HMRC’s API (Application Program Interfaces) platform.

Initially, MTD will be implemented for VAT-registered businesses. For all other types of taxes, MTD will be implemented in a phased manner.

To put it in simple words, earlier businesses were able to maintain their records in excel spreadsheets and calculate VAT and then by logging onto HMRC’s website, they were able to fill 9 boxes of VAT return by entering numbers manually. With the introduction of MTD, this option will no longer be available.

All businesses will have to use software to submit VAT returns. Several Cloud-based software have been approved by HMRC for the submission of VAT returns under MTD.

Businesses can use either:

  • A compatible software package that allows keeping records and submitting VAT Returns
  • Bridging software to connect non-compatible software such as spreadsheets to HMRC systems

Also, small businesses, who cannot afford Cloud-based software, have the option to use Bridging software to submit information digitally to HMRC.

Such Bridging software should have the capability to:

  • Connect software to HMRC systems;
  • Allow to report VAT information to HMRC; and
  • Allow HMRC to send information to the taxpayer.

Exemptions from MTD

Businesses are exempted or do not have to comply with MTD if

  • It’s not reasonably practicable to use digital tools to maintain business records or submit VAT Returns due to age, disability, the remoteness of location or for any other reason
  • The business is subject to an insolvency procedure
  • The business is run entirely by religious society members whose beliefs are not compatible with using electronic communications or maintaining electronic records


To claim an exemption, a business must call or write to HMRC and provide the information specified in the updated guidance. Until HMRC’s decision is received in writing, businesses should continue to file VAT returns in the usual manner.

Digital Records

The requirement to keep digital records does not imply that businesses have to scan digitally and store invoices and receipts. Businesses can continue to keep documents in paper form if they prefer but each individual transaction needs to be recorded and stored digitally.

HMRC would like to encourage records to be kept in as near to real time as possible,

Designatory Data:

  • VAT registration number
  • Name of the business or organisation
  • Address of the principle place of business
  • Details of VAT accounting schemes used, if any

For Supplies Made:

  • The time & value of supply
  • The rate of VAT charged

For Supplies Received:

  • The time of supply
  • The value of the supply
  • VAT that is not claimable by the business
  • The amount of input tax to be claimed
  • In case of more than one supply on an invoice, the business can record the total from the invoice.

What Happens on 1 October 2019?

Businesses in the deferral group must keep digital VAT records from first VAT Return period starting on or after 1 October 2019 if your business has a taxable turnover over £85,000 and either:

  • Part of a VAT group or VAT division
  • Trader based overseas
  • Trust
  • Not for profit organisation that is not set up as a company
  • Uses the annual accounting scheme
  • Local authority
  • Public corporation
  • Make payments on account
  • Uses the VAT GIANT service

HMRC will send you a letter informing about inclusion in the deferral group. If you haven’t received a letter, your business is not in the deferral group.

How Initor Can Help with Making Tax Digital for your Business

Businesses can continue focusing on the growth of business and we will take care of all MTD compliance. Our team of experts will help prepare and submit VAT Returns. Initor team will speed up key business processes, saving time, reducing human errors and minimizing costs by driving efficiencies.

We can help you sign up your business for MTD for VAT. Businesses must sign up for Making Tax Digital at least one week before your VAT Return is due.

All businesses are required to comply with MTD and submit their VAT returns via HMRC’s new digital platform. It is important to use accounting software or a combination of software packages that are compatible with HMRC’s digital platform, or spreadsheets. Initor Global team will advise you on the cost-efficient accounting software to be used.

If you are using Excel spreadsheets, we will advise you on compatible software to be used.

Our team will adopt a highly effective approach to digital transformation. This will not only help to comply with MTD, but also with future tax legislation. Getting ready for MTD is a great way to gain the advantage of the wider benefits of digital transformation across whole finance and accounts processes.