Making Tax Digital ― VAT ― returns and compliance

Produced by Tolley

The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Making Tax Digital ― VAT ― returns and compliance
  • Keeping digital records
  • Third party software
  • Digital links
  • Soft landing period for digital links
  • Digital link deadline extension for businesses with complex legacy IT systems
  • API-enabled spreadsheets
  • Digital records
  • Supplier statements
  • Petty cash
  • More...

Making Tax Digital ― VAT ― returns and compliance

This guidance note provides an overview of digital records and submitting VAT returns using Making Tax Digital (MTD) compatible software.

For MTD for VAT more broadly (including who must follow MTD requirements and how to sign up), see the Making Tax Digital ― overview guidance note.

HMRC has produced some Help and support for Making Tax Digital videos to assist businesses with signing up to MTD and using MTD.

HMRC has also provided further information which may be of use in the MTD ― HMRC developer hub.

Keeping digital records

HMRC’s view is that keeping records digitally will result in more accurate and timely record keeping that will assist with reducing the number of errors that are associated with manual record keeping. Quarterly updates that are taken directly from digital records will help to prevent errors from occurring as there will no longer be manual processes and calculations involved when information is transcribed from one format into another.

The software should contain nudges and prompts that assist with eliminating common errors that can occur and should result in businesses obtaining greater confidence that their VAT returns are correct. As a result, it should not be necessary for HMRC to undertake compliance visits in order to confirm that the business’ VAT position is correct. This should reduce the admin burden and costs involved for both HMRC and the business concerned.

Third party software

The regulations state that a business that is required to use the MTD provisions must

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