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Everything you need to know about Making Tax Digital (MTD) for VAT with QuickBooks Online

SOLVEDby QuickBooks557Updated May 24, 2023
This page explains the latest Making Tax Digital (MTD) changes and how they affect your business. From the latest updates to step-by-step guides and FAQs, so you can be MTD ready.

Expand the sections below by selecting the headings to find what you need.

Making Tax Digital is HMRC’s initiative to transform the UK tax system and move it online. Think of it as switching from spreadsheets and paper records to a new digital system. Since April 2021, VAT-registered businesses have had to keep digital records and submit their VAT returns using 'functional compatible software' that can connect directly to HMRC. This means HMRC will only accept VAT returns sent using MTD-compliant software, like QuickBooks Online.

Am I affected by Making Tax Digital?

As of April 2022, all businesses that are registered for VAT must be compliant with MTD, regardless of their annual turnover. This means that if you're VAT-registered, you need to start using MTD-compatible software to keep your records and submit your VAT returns. When you register your business for VAT, you are automatically signed up for MTD for VAT.

Do I need to sign up for MTD for VAT?

As a VAT registered business, you may be wondering if you need to sign up for Making Tax Digital for VAT. The short answer is no–all businesses should be automatically signed up for MTD for VAT by HMRC, unless they are exempt or have applied for exemption.

Initially, MTD rules only applied to businesses with a VAT taxable turnover above the £85,000 threshold. From April 2022, all VAT-registered businesses must use MTD-compliant software that can connect directly with HMRC. These are the deadlines for MTD:

April 2021The option to submit VAT returns has been removed from the HMRC website.
April 2022MTD applies to all VAT-registered businesses. Businesses will need to use MTD-compliant software that can connect directly with HMRC to submit VAT returns.
November 2022The old VAT portal will close. VAT-registered business will no longer be able to file VAT returns via their online VAT account.
April 2026MTD for Income Tax applies to self-employed businesses and landlords with an annual business or property income above £50,000.
April 2027MTD for Income Tax applies to self-employed businesses and landlords with an annual business or property income above £30,000.

Whether you're setting up MTD for the first time in your QuickBooks account or need help submitting a VAT return, here are some helpful articles.

If you're an accountant or bookkeeper

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Have more questions for us? We've got you covered! Select the FAQ heading to find what you need. Or, post a question on our Community to start a discussion with an expert.

Yes. QuickBooks Online is fully compliant with MTD legislation. A key change is that from April 2019 HMRC will no longer provide online tools for the digital submission of VAT returns. QuickBooks makes it easy to store digital records securely and file VAT returns directly with HMRC.

Keeping your records digitally for MTD means that you must store a digital copy of the transactions which make up the figures on your VAT return. QuickBooks Online automatically does this for you. Think of it as a transformation from spreadsheets and paper records to a new online system.

Yes! If you are on the Flat Rate Scheme (FRS), you can submit an MTD VAT return in QuickBooks Online. Before you do, make sure you switch on the MTD feature and connect QuickBooks to HMRC.

If you are an accountant or bookkeeper, read this.

QuickBooks Online is not compatible with Customs Declaration Software (CDS), and it's not possible to submit customs declarations through MTD. 

Yes, but not for the same period. For example, if you've successfully filed an MTD VAT return for the tax period from 1 to 31 January 2021, then you can't file the VAT returns for the missed period before these dates.

If you wish to file the VAT return before that period, then you need to use QuickBooks trial edition to submit the missing period.

If the companies have the same VAT registration number, then you can combine the figures and submit the return via the bridging tool.

If the companies have different registration numbers, you must file separate returns using the relevant VAT registration numbers for each company.

QuickBooks MTD software currently supports Standard, Cash and Flat Rate schemes. QuickBooks Bridging Software supports Standard and Cash schemes. Businesses whose home currency is not GBP are currently not supported for MTD.

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