Posted: 28. May 2019 by: Rupert Tennant

Rules About Making VAT Digital

Rules about Making VAT Digital

May 28, 2019
Making VAT digital is a government initiative for the digitalization of the whole administrative process regarding Value added tax. Since it’s a tax that affects almost every business and every customer, it’s something you’ll need to prepare for.
Digitalization of this process is a long time coming, and its main goal is to make the tax collection more transparent, and better organized all around. It’s also a savings tool that will help both the government and the businesses alike. However, the difficulty is always in the adjustment.

Who must follow the new rules?

New rules are becoming active on the 1st of April this year, and if you fall under the circumstances described in the HMRC rulebook, you need to start using digital VAT returns and payments on that day. It needs to be done by those who have a turnover of over £85.000.

  • You’ll need to apply if you’re a part of a VAT scheme.
  • You own a trust
  • You own a non-profit organization that pays zero VAT rate
  • You are a public corporation.
  • You have to make payments on account.

HMRC will notify you about your status via a letter in advance.

Applying for exemption

There are a few cases in which you can be exempt from MTD initiative, and if you think you fall under these guidelines, you should notify HMRC about it. These exemptions are:

  • If you’re unable to use a computer due to a disability
  • If you’re unable to use a computer due to where you live
  • if you’re unable to use a computer due to your age
  • If you’re a subject to an insolvency procedure
  • If you object to using a computer on religious grounds

All of these subject to governmental control and review.


The next step is to choose the right software for the job. Firstly it needs to be approved by HMRC which is something you should ask both the software provider and HMRC about. Once you’re sure that it’s the software the government will accept you should go into its features and functions.
The software also needs to be something your employees will be able to use, and that can be scaled up and down based on how your business develops and grows. It’s also useful to choose software that will handle other HR-related features as well.

Digital records

The key to any accounting practice is to keep the records that prove you’ve made a particular financial transaction and that you can then send to HMRC. This needs to be done when you’re filing and paying your taxes digitally as well. There are a few ways to keep the records.
-It can be done via a software solution you’ve chosen
-You can still use spreadsheets but they need to be added to the software you’re using
-Via other software products that are made for storing data in particular
Have in mind that this also opens up the issue of storage and servers you need to provide

Business records

Your company also needs to keep business records that state a few basic facts about the company itself. These need to be found online and are partly about the company itself and partly about its tax-paying records.  They include:
-Business name and address
-VAT registration number
-A record of accounting VAT scheme you’re under if you have one
-Details about your supplies in terms of what you make what you receive
The tax-related documents, on the other hand, include:
-What taxes you owe on sales
-What business purchases you’ve made
-What you owe towards companies in the EU.

Is it better?

The question remains the new system for collecting VAT better than the old one. It’s rather difficult to answer partly because the system isn’t in place for that long of a time. There’s also a question of from whom the system is working.
At this point, the price of confusion and adapting still needs to be taken into account. It will take some time until companies are ready to adapt and figure out what they can get out of this system and how to use it with ease as they did the old one.


Making VAT digital is a governmental initiative for making the filing and paying VAT related returns via a software solution. This means that a business will firstly need to register for VAT and then get the software that suits their needs in this regards. This starts this year, and it’s mandatory for all the companies paying VAT even for those paying zero rates.
This software should also be used for your business to keep and store the documents that are needed to pay VAT and to provide HMRC with the proper data needed for an audit.