Making Tax Digital – Latest Guidance

30th October 2017

Despite previous delays and uncertainty, the September Finance Bill put the HMRC Making Tax Digital (MTD) project confidently back on the map, with firm proposals for legislation related to the digital reporting of VAT returns. making tax digital september finance bill


Recap of July 2017 Update

In a previous update on 13th July 2017, it was announced that MTD would now only be applicable for VAT returns, effective from April 2019. From that date, businesses with a turnover above the VAT threshold (currently £85,000) will have to:

  • Keep records digitally for the purposes of VAT reporting
  • Provide VAT return information via HMRC “functional compatible” software

It was also confirmed that MTD would also be available on a voluntary basis to all other businesses for both Income Tax & VAT.


September 2017 Update

The latest Finance Bill, published on 8 September 2017, includes new legislation that allows HMRC to introduce specific regulations for ensuring that businesses meet the new MTD requirements with regards to VAT.

Specifically, the new legislation introduces a new Clause 62 into Schedule 11 of the VAT Act 1994 (administration, collection and enforcement).

For those businesses above the VAT registration threshold, the clause introduces new powers allowing HMRC to make regulations that require a business to keep, preserve and submit certain records digitally.

Key points of the legislation

Below are some key points of the new legislation. Further details can be found in HMRC’s September MTD update.

  • Businesses will need to preserve digital records in “functional compatible” software, for up to 6 years
  • Following deregistration, a business must preserve their records for up to 6 years
  • The information that a business will need to keep and preserve digitally will include:
  • Business name
  • Principle place of business
  • VAT registration number
  • Information regarding which VAT accounting scheme is used by the business
  • The VAT account
  • Information about supplies made and received


Although the MTD timetable has slowed, with the first wave now incorporating VAT returns only, this new legislation shows a continued commitment to MTD.

The intention is that HMRC will introduce all new VAT regulations related to MTD no later than April 2018, giving businesses and software developers at least 12 months to prepare before the VAT requirements come into force in April 2019.

HMRC is continuing to work alongside commercial software suppliers such as Xero, FreeAgent and Sage to develop systems and products to enable digital record keeping. Pilots of MTD for business for income tax are also continuing with a small number of volunteers.

If you would like any further advice on Making Tax Digital or how your business could benefit from digital accounting software, please do not hesitate to contact one of our Accounting team.

Chartered Accountants in Sunderland, offering expertise on everything from Tax and Business Planning,
to Accounts and VAT.