Making Tax Digital for VAT
Last updated: 20 December 2022
Please use the menu below to access the latest information on MTD for VAT.
The technical team are always interested in receiving feedback from members on MTD for VAT and hearing about their practical experiences. Please email your experiences to [email protected]
- Latest news
- Making Tax Digital (MTD) scheduled maintenance
- Detailed VAT Timetable
- Agent Services Account (ASA) and Services for Agents
- Legislation
- Further information and guidance
Latest News
VAT portal closure on 1 November 2022
The online VAT filing portal closed on 1 November 2022. From this date, businesses are no longer able to use the VAT portal to file their returns, subject to the following limited exceptions:
- Where HMRC have agreed that a business is exempt from MTD for VAT, or the business is waiting to hear back on an exemption application, they can continue to use the portal.
- Businesses with turnover below the VAT threshold who were due to file a VAT return by 7 November could use the portal for that return only.
- Businesses filing annual VAT returns can use the portal until 15 May 2023.
All other businesses need to file using compatible software, or apply for an exemption as soon as possible. HMRC have now signed up all remaining VAT registered businesses to MTD, and there is therefore no longer any requirement to complete a separate sign-up step.
The next phase of MTD
MTD for VAT was extended to all VAT registered businesses, regardless of turnover, from April 2022 (previously it only applied to businesses with taxable turnover above the VAT threshold of £85,000).
Penalty reform
A new penalty and interest regime for VAT will apply from 1 January 2023. The existing default surcharge regime will continue throughout 2022 and there will still be a 12 month ‘period of familiarisation’ for late payment penalties when the new rules are introduced. You can find out more about the new late filing penalties in a recent article for AccountingWEB written by ATT Technical Officer Emma Rawson.
MTD for VAT scheduled maintenance
Details of planned downtime and service issues for Making Tax Digital can be found on the following pages:
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Timetable for Making Tax Digital for VAT
MTD became mandatory for VAT purposes from April 2019 for the majority of businesses with taxable turnover above the VAT threshold (currently £85,000).
Mandation of MTD for VAT was delayed by six months for a small number of businesses with more complex requirements. MTD for VAT became mandatory from 1 October 2019 for businesses that fell into any of the following categories:
- trusts;
- not for profit organisations that are not set up as a company;
- VAT divisions;
- VAT groups;
- public sector entities required to provide additional information on their VAT return (such as Government departments and NHS Trusts)
- local authorities;
- public corporations;
- traders based overseas;
- those required to make payments on account; and
- annual accounting scheme users.
In order to be deferred until 1 October 2019, affected businesses needed to have received a letter from HMRC confirming that this was the case.
MTD for VAT was further extended to all VAT registered businesses, regardless of turnover, from April 2022 (prior to this date it was only mandatory for businesses with taxable turnover above the VAT threshold of £85,000).
Under MTD for VAT businesses have to:
- keep digital records;
- use API enabled software (see below) to submit their VAT return to HMRC; and
- have digital links in place where more than one piece of software is used to carry out the above.
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Detailed VAT Timetable
Commencement of MTD for VAT
The exact date that businesses subject to MTD for VAT from 1 April 2019 came into the new rules depended on their quarterly return date. The rules apply to the first ‘prescribed accounting period’ starting on or after 1 April 2019. The commencement dates were therefore as follows:
| VAT quarter ends | Start of first return subject to MTD |
| March/June/Sept/Dec |
1 April 2019 |
| Jan/April/July/Oct |
1 May 2019 |
| Feb/May/Aug/Nov | 1 June 2019 |
For those businesses subject to the six month deferral set out above, MTD applies to the first ‘prescribed accounting period’ starting on or after 1 October 2019, meaning commencement dates are as follows:
| VAT quarter ends |
Start of first return subject to MTD |
| March/June/Sept/Dec |
1 October 2019 |
| Jan/April/July/Oct | 1 November 2019 |
| Feb/May/Aug/Nov | 1 December 2019 |
Businesses that are below the VAT threshold came into MTD for VAT from their first 'prescribed accounting period' starting on or after 1 April 2022.
Enrolling into MTD for VAT – timetable
HMRC's new VAT registration service launched on 1 August 2022 automatically signs up newly registered taxpayers for MTD for VAT. HMRC have now also signed up all remaining VAT registered businesses to MTD, and there is therefore no longer any requirement to complete a separate sign-up step.
Agent Services Account (ASA) and Services for Agents
In order to access MTD services and to supply updates on behalf of clients, agents need an Agent Services Account (ASA). This is in effect a new Government Gateway to access the new service. Each agency will have just one ASA per firm, and will be able to set up staff with administrator or assistant access to the account. Many firms may already have created an ASA in order to submit Trust Registration Service returns.
A basic outline of the ASA and how to set one up can be found here. Further information on the ASA can also be found in the HMRC guidance Making Tax Digital for VAT as an agent: step by step.
When you first set up your ASA account you will be given a new set of credentials. It is very important that you keep these safe, as HMRC have said they are unable to advise agents of the credentials they were given on set up. Instead, if an agent loses their ASA credentials they will have to contact the VAT helpline, who will delete their ASA account. They will then be required to set up a new ASA account from scratch.
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Legislation
Enabling primary legislation for MTD for businesses for VAT is included in Sections 60 to 62 and Schedule 14 of Finance (No.2) Act 2017 which received Royal Assent on 16 November 2017. The explanatory notes to the original Bill can be found here.
The final MTD for VAT Regulations SI 2018/261 were laid before Parliament on 28 February 2018 and came into force on 1 April 2019.
VAT Notice 700/22: Making Tax Digital for VAT was published on 13 July 2018. This Notice sets out the detailed requirements of MTD for VAT, including record keeping and digital links.
Further information and guidance
HMRC’s most common MTD customer support queries
This document summarises the most common of HMRC’s customer support issues for MTD and the associated HMRC guidance, including:
Exemption from Making Tax Digital
Businesses do not have to follow the MTD for VAT rules if any of the following apply:
- It’s not reasonably practicable for them to use digital tools to keep their business records or submit VAT returns due to age, disability, remoteness of location or any other reason (often referred to as ‘digital exclusion’).
- They are subject to an insolvency procedure.
- The business is run entirely by practising members of a religious society or order whose beliefs are incompatible with using electronic communications or keeping electronic records.
Where any of the above apply the business has to apply to HMRC to claim an exemption.
Businesses that were previousy exempt from online filing are automatically exempt from MTD, and do not need to apply to HMRC.
Further information on when exemption may be available and how to apply can be found in Section 3 of VAT Notice 700/22. If you are making claims for exemption on behalf of your clients, we would like to hear your experiences. Please email us at [email protected].
Software
Businesses within MTD are required to use software to keep their records and submit returns to HMRC via their Application Programming Interface (API).
There are essentially three different types of MTD compliant software:
- Software packages that can be used to keep digital records and file returns via HMRC’s API.
- API enabled spreadsheets – spreadsheets with an inbuilt function allowing them to file returns via HMRC’s API.
- Bridging software which can take return information from an existing spreadsheet and submit this to HMRC via their API.
Where a spreadsheet is used, the relevant data must be digitally transmitted from the spreadsheet or other source where the digital records are kept, directly to HMRC. The summary information for completion of the VAT return must not be physically re-typed into another software package.
The current list of MTD compatible software for VAT can be found here.
Other information and guidance
HMRC's guidance on MTD for VAT can be accessed from its collection page.
HMRC have also produced a Making Tax Digital for Business – stakeholder communications pack which contains a variety of information for both Income Tax and VAT, including some frequently asked questions.
Tolley's Tax Technology Horizon report provides a deep dive into the key issues that digitalisation presents to businesses and tax advisors, including:
- What tax technology tools are available, and how are they being employed?
- What opportunities and challenges does tax technology present for the future?
- How is technology changing the skill sets required within tax practices?