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 only 20% businesses Brexit customs ready

March 5, 2019

HMRC estimates that 245,000 businesses buy and sell goods with other EU27 states. When the UK leaves the Customs Union, 29 March, all movements of goods must be declared for customs, tariffs and VAT. This requires an EORI number (Economic Operator Registration Identification), which is shown on customs declarations etc.

HMRC warns digital companies on new Brexit VAT obligations

March 1, 2019

HMRC is writing to thousands of UK, US and other international sellers of digital services to warn them to now VAT register in another EU state in readiness for a no-deal Brexit. This covers their sales of e-services, apps, streaming media, online gaming and dating, e-books and software to EU consumers.

UK £135 small parcel VAT portal opens for Brexit

February 14, 2019

The UK’s HMRC has opened the registration portal for foreign delivery companies to register post-Brexit VAT on consumer good parcels below £135. This new regime will be triggered under the current default no-transition deal Brexit on 29 March 2019.