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Making Tax Digital for VAT - plan for the inevitable to make tax digestible

by Deborah Garvey FCCA, APS Accountancy 

The end of the tax return?

HMRC are determined to see the end of the annual tax return and are transforming the entire tax system; with the ultimate aim of making it more effective, efficient and simpler for the taxpayer; this sounds like an excellent idea.

In the same way traffic light labelling on food encourages healthy choices, HMRC have been nudging businesses towards taking their tax affairs online with digital tax accounts and real time payroll reporting already in place.

Taking VAT reporting online is the latest bite size portion that will see 96% of businesses affected by Making Tax Digital (MTD) submitting electronically after 1st April 2019.

...from 1 April 2019, what's changed?

  • VAT registered businesses with turnover above £85,000 must keep digital accounting records. Paper records no longer meet the legal requirements in tax legislation.
  • VAT returns must be submitted using a software product compatible to HMRC’s platform.

...And, what's not?

  • the amount of information submitted to HMRC; the VAT return contains the same 9 boxes as before
  • filing and payment deadlines
  • VAT rules other than the requirement to keep digital records of all business transactions


Habits, both good and bad, are hard to break and businesses relying on manual processes will have to implement the most significant changes.  Whilst making better choices about diet and exercise might be difficult to sustain in the beginning, eventually taking the stairs instead of the lift or substituting an apple instead of chocolate will feel normal.

Similarly, changing the way you look after your business can bring more benefits than simply complying with new HMRC demands. There is no doubt that manual processes will have to change, either by using ‘bridging’ software that will translate a spreadsheet into a format readable by HMRC or by switching to accounting software.

Software available 

Accounting software such as QuickBooks Online (QBO), Xero and Sage are already MTD for VAT compliant. Having been through a very similar process once before with payroll reporting, anyone now producing a payroll with complaint software is likely to agree that making RTI (Real Time Information) returns is now a piece of cake.  MTD for VAT will be equally easy to swallow.

Additional benefits to using software 

In addition, there are other benefits when you switch to accounting software that you may not have considered. Up to date management information from the software means you will be able to monitor day to day profits and cash quickly and easily, leaving you more time to concentrate on doing what it was that inspired you to set up your business in the first place.

Signing up 

…Step 1 When to sign up

AFTER all the non-MTD for VAT returns have been filed each business will need to sign up to MTD for VAT using their existing government gateway user ID.  HMRC will send a confirmation email that the business can now use their MTD compatible software to file a VAT return.

…Step 2 Authorise your MTD for VAT software

The software must be authorised to communicate with HMRC. This can be initiated from the software product.

About Deborah Garvey FCCA  

Deborah is a director at APS Accountancy Ltd, an independent accountancy practice of Chartered Certified Accountants (ACCA) offering a full range of accountancy and tax services.

APS hold free monthly workshops at their office in Aylesbury on a range of accountancy and tax topics from ‘VAT - the basics’ to ‘making management accounts’.

Deborah has a proven track record of supporting and managing small and medium sized businesses with all of their accounting needs.  She has had a varied career in accountancy practice, industry and in running her own business, which allows her to fully appreciate the needs and nuances of small businesses and how to help business owners better understand and control their finances.

You can find out more about APS Accountancy here:

Webinar - 6 August 

Join our webinar with Deborah on 6 August, for an explanation of the new VAT reporting rules on Making Tax Digital (MTD) for VAT, when and how to sign up, what records to keep and the various solutions for compliance. Find out more and register here:

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