Making Tax Digital

From April 2019, HMRC is launching the Making Tax Digital (MTD) initiative, an ambitious plan to turn HMRC into one of the most digitally advanced tax administrations in the world.

Under the new system every UK VAT registered business, over the registration threshold, will be required to store submit their VAT returns digitally to HMRC, without any manual intervention. Avalara's VAT Reporting software is now MTD certified by HMRC.

Timetable for April 2019 VAT MTD launch

VAT is the first tax to launch on MTD. From 1 April 2019, all VAT registered businesses will be required to record and submit their VAT return data electronically. There must be no manual, human element in the process.

There is a control period pilot from April 2018. Between July 2018 and March 2019 the application programming interface (API) goes live for businesses to use. Any business entering either of these phases cannot subsequently leave them prior to the April 2019 launch.

By 2020 most businesses will be required to keep track of their corporation tax digitally too, using software or apps to keep records of their income and expenditure.

Making Tax Digital is about bringing the tax system into the digital age, saving businesses time, and in the long run – money.

VAT MTD requirements

The requirements will only apply to businesses over the UK VAT registration threshold (currently £85,000).

This creates the following requirements:

  • Storing data digitally on functional compatible software package
  • Calculation of VAT liabilities by the automated software
  • File the 9-box UK VAT return data via the HMRC’s JSON API platform, under the ‘API First Strategy’. This replaces keying-in or the existing XML API
  • New authentication process
  • Receive digital information in return from HMRC
  • A controlled process around adjustments and error corrections

What information must be kept digitally?

The following data must be stored digitally:

  • The business name
  • The address of the principle place of business
  • VAT registration numbers
  • A record of any VAT accounting schemes that are used
  • For each taxable supply:
    • The time of supply
    • The value of the supply
    • The rate of VAT charged
  • For each VAT return submitted:
    • The output/input tax
    • The output/input tax on acquisitions from other EU member states
    • The tax required to be paid/reclaimed under the reverse charge for supplies
    • Any tax to be paid following a correction or error adjustment

Join Avalara's MTD beta program

Avalara are working with HMRC on the Making Tax Digital pilot scheme. Avalara is committed to helping businesses of all sizes to stay compliant  and meet the ever changing demands of global tax authorities.

Join our beta program today to prepare for the April 2019 launch of MTD.

Latest British news

UK HMRC wins catering VAT case

February 4, 2019

HMRC has won a tax tribunal ruling which held that the sandwich shop chain, EAT Limited, had to charge 20% VAT on its bacon breakfast muffins and grilled ciabatta bread products. EAT is now obliged to settle a £632,620 VAT bill for failing to levy VAT on these products.

EU VAT and tax veto review

January 25, 2019

The European Commission (EC) has proposed switching from unanimous to majority voting on EU VAT and other tax policies.  The aim is to progress fiscal reforms which face immovable opposition from just a limited number of member states. 

UK MTD pilot open to VAT groups

January 24, 2019

HMRC has extended the Making Tax Digital for VAT pilot to members of VAT Groups. MTD will require over 1 million businesses above the £85,000 VAT registration threshold to record