Making Tax Digital For VAT Guidance Issued

HMRC have now issued their detailed guidance on the digital record keeping and return requirements for Making Tax Digital (MTD) for VAT. VAT Notice 700/22 clarifies that spreadsheets may still be used to keep your business records, provided there is a bridging software linking to the Government gateway. You will however get a one year “grace” period during your first year of MTD when your business will not be required to have digital links between software programs, referred to in the VAT Notice as a “soft landing”. You will see that the VAT notice includes a number of helpful examples, illustrating different accounting systems, and the digital links required to comply with MTD for VAT. This is essential reading if your business is VAT registered.

When Does MTD For VAT Start? 

The Making Tax Digital rules apply from your first VAT period starting on or after 1 April 2019. A ‘VAT period’ is the inclusive dates covered by your VAT Return. For example, if your business submits quarterly returns covering the periods to 28 February, 31 May, 31 August and 30 November, then your business will need to comply with Making Tax Digital rules for the VAT quarter starting 1 June 2019 and ending on 31 August.

“Soft Landing” For MTD For VAT For The First Year

For your first year of MTD for VAT (VAT periods commencing between 1 April 2019 and 31 March 2020), your business will not be required to have any digital links between software programs. The one exception to this, is where data is transferred, following preparation of the information required for the VAT Return, to another product (for example, a bridging product) which is an Application Programme Interface (API). Enabled solely for the purpose of submitting the 9 Box VAT Return data to HMRC. Your transfer of data to this product must be digital. For your first year of MTD for VAT (VAT periods commencing between 1 April 2019 and 31 March 2020), where a digital link has not been established between any software programs, HMRC will accept the use of cut and paste as being a digital link for these VAT periods. However, for VAT periods starting on or after 1 April 2020, you must establish a digital link for any transfer or exchange of data between software programs, products or applications used as functional compatible software.

Use Of Spreadsheets In Preparing VAT Returns

Example 3 in the VAT Notice describes a business using a spreadsheet and bridging software from April 2019, which allows the information to be transferred to HMRC via an API.  It uses a spreadsheet to record all sales, purchases, and expenses in a digital format. Your VAT Return is then prepared within the spreadsheet, using formulae already written into the spreadsheet. Your VAT Return information is then sent via a mandatory digital link to a bridging software, which digitally submits your information directly to HMRC.  Example 6 shows how a spreadsheet would be acceptable in order to consolidate your VAT information prior to submitting your Group VAT return. 


Lotuswise Chartered Accountants and Business Consultants can help support you and your business with the complexities of these tax and payment rules and help you get ready for this significant change in VAT accounting and reporting. To find out how, please contact us. To also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.

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