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Making Tax Digital retailer actions
By bira

Making Tax Digital – action needed!

Recent research by software provider Intuit QuickBooks revealed that 41% of business owners in the UK have never heard about Making Tax Digital (MTD) and of those who had, 76% are finding it difficult to understand how it would affect them. Jo Nockels from TaxAssist Accountants answers your questions.

What’s happening?

From April 2019, VAT-registered businesses with turnover above the current £85,000 VAT threshold must be ready to maintain their financial records digitally and be able to submit their VAT returns directly to HM Revenue & Customs using compatible software.

How will Making Tax Digital affect me and my business?

In April, businesses with a turnover above the current VAT threshold of £85,000 will be required to maintain digital records – but only for VAT purposes. Businesses with turnover under the threshold will not have to use the new system but have the option to do so voluntarily.

Those taxpayers who are already familiar with using desktop software for book-keeping may have to make an upgrade to remain compliant. While this means an additional cost and inconvenience initially, the potential benefits of changing to a more user-friendly and efficient software will save you time and money.

If you already use software, you should speak to your software provider to find out when it will be MTD-compatible and what you must do. From April 2019, software must be MTD-com-patible in order to send VAT returns to HMRC.

If you use spreadsheets, these must be able to submit the required data to HMRC digitally.

If the spreadsheet cannot do this, then the VAT return must be submitted via separate MTD-compatible ‘bridging software’. Such software allows relevant data to be digitally exchanged from the spreadsheet or other sources where the digital records are kept directly to HMRC.

What if I am already filing my tax return through the Government Gateway?

Since 2010, VAT-registered businesses have been able to submit their VAT return by logging into the Government Gateway and manually inputting the figures or by using bookkeeping software.

According to HMRC, while 99% of VAT returns are submitted online, only about 13% of those are submit-ted via software. The other 87% of VAT returns are manually entered in to HMRC’s Government Gateway.

Under MTD for VAT, affected businesses will no longer be able to use the Government Gateway website. Instead, they will have to submit their VAT returns via MTD-compliant software and maintain their records digitally.

This means hand-written VAT records will be a thing of the past for businesses using MTD.

What if I don’t do it?

In its draft Finance Bill 2018-19, the Government outlined a two-tier penalty system that will affect those businesses which come under the Making Tax Digital remit.

The proposed penalty regime for businesses and individuals will be enforced within 15 days of an overdue tax payment. However, the draft bill has indicated there will be an initial grace period for late filers who may still be getting to grips with the new digital system.

HMRC has confirmed that fines for being unable to maintain digital records will come into force from April 2019 too, but there will be an initial grace period for those whose financial data is overdue. Fines for the late filing of digital returns will be imposed from April 2020.



If you would like TaxAssist Accountants to help you through these changes, click here to find out more and how to get in touch.


HMRC has released a list of software houses that have tested their products in HMRC’s test environment and demonstrated a prototype of their software to HMRC. Visit

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