Understanding UK’s Making Tax Digital (MTD) for VAT


The UK government’s goal is to make it simpler for people and companies to file their taxes correctly and stay on top of their finances, and the UK’s Making Tax Digital (MTD) for VAT is a vital component of that effort. The long-term goal is to take its place among the most innovative tax authorities in the world in terms of technological sophistication. As part of the initiative dubbed “Making Tax Digital,” significant alterations are being made to the functioning of the tax system to make tax administration straightforward, faster, and effective for taxpayers. 

Understanding UK’s MTD for VAT

According to MTD, all firms that produce VAT (over the VAT threshold) must keep digital records and submit them to the HMRC system using commercial software provided by a third party. Essential points regarding UK’s MTD for VAT are: 

  1. Record all of the VAT transactions digitally.
  2. Exchange data digitally if any data transfer is required.
  3. Always use the HMRC API to submit the VAT returns.

How to Handle UK’s MTD for VAT?

After April 2019, all businesses with taxable sales over the VAT level (£85,000 annually) must open an online digital tax account and submit their quarterly VAT return files electronically to the HMRC system. Companies with KDV below the VAT level may voluntarily enrol in this scheme.

The following categories of people and organizations are expressly excluded from this rule, as outlined by HMRC:

  • Nonprofit Organizations (trading subsidiaries of charities are not exempt)
  • Landlords and sole proprietors whose yearly revenues are less than £10,000
  • People that are unable to use internet resources due to their religious beliefs, age, physical limitations, geographical isolation, or any other reason

To provide the pilot participants with a more complicated needs time to evaluate the service, we have decided to push back the mandatory enrollment deadline by six months for these firms. These companies must switch to digital record-keeping, and MTD-compatible software for VAT returns to HMRC by October 1, 2019. The law mandates a 6-year record retention period. In the case of VATMOSS, the records should be maintained for 10 years.

Easiest MTD with S4FN

Solutions for Finance (S4FN) provides e-invoicing solutions and add-ons to make the SAP system legally compliant with electronic regulations. 

S4FN provides the easiest way to manage your VAT returns as per UK’s MTD for VAT. UK MTD SAP add-on helps make tax digital fast. Some of its features are:

Salient Features 

  • MTD Cockpit for SAP
  • Retrieve VAT Liabilities
  • Retrieve VAT Payments
  • Retrieve VAT Obligations
  • View Submitted Vat Returns
  • Submit VAT Return for the Period

If you are a VAT-registered business with a taxable turnover above the VAT threshold that needs help with MTD rules, please schedule a consultation session to learn more. 

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