What is Making Digital Tax for VAT?
MTD for VAT requires VAT-registered businesses with taxable turnover above the £85,000 threshold to:
- keep records digitally
- file VAT returns using software via VAT (MTD) API
Note: MTD UK for VAT doesn’t affect the frequency of submitting a VAT Return.
Who is exempt from MTD?
If you are under the threshold or use the VAT GIANT service (e.g. you are a government department or an NHS trust), you are not under any obligation.
Businesses below the threshold can use this service voluntarily.
From 1 April 2022, all VAT registered businesses must start following the rules for MTD VAT, regardless of their taxable turnover.
How do I set up MTD VAT?
First, you need to register with HMRC. Then, you need to use compatible software that connects to HMRC.
After 1 April 2021, if you use more than one piece of software to keep records and submit returns, you must link your software digitally. This means that data is delivered electronically and without manual intervention (such as copying and pasting).
Digital links include sending e-mails, using formulas to link cells in spreadsheets, and importing and exporting XML and CSV files.
What records do I need to keep digitally?
- business name, address, and VAT-registration number
- VAT accounting schemes in use
- VAT on goods and services supplied and received
- time and value of supply for everything bought and sold
- VAT rate charged on goods and services supplied
- reverse charge transactions
- total daily gross takings, in case you use a retail scheme
- items you can reclaim VAT on, in case you use a flat rate scheme
- your total sales and the VAT amount, in case you trade in gold and use the Gold Accounting Scheme.
In addition, you must keep digital copies of documents made by third-party businesses, volunteers for charity fundraising, and employees for expenses in petty cash on behalf of your business.
You need to add all your transactions to the digital records. However, you don’t have to scan paper invoices and receipts.
How does MTD work?
- The taxpayer enters the VAT account data into the software.
- The software reports to HMRC via the API.
- The API submits this data to an HMRC database, where it is stored.
How can SNI help you with MTD for VAT?
SNI “MTD for VAT solution” enables you to keep all your SAP VAT records in digital format. The SNI solution automatically submits VAT returns to HMRC via a digital link. Therefore, your digital transformation efforts are minimized, while you stay compliant with the HMRC VAT regulations.