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Making Tax Digital (MTD) FAQ

Have a burning question about Making Tax Digital? Read this article to get answers to frequently asked questions about MTD, plus more helpful articles and resources.

As part of HMRC's Making Tax Digital (MTD) plans to modernise the tax system, the Government is changing the way VAT registered businesses create and submit VAT Returns.

Businesses with a taxable turnover above the VAT threshold of £85,000 are required to file their VAT returns electronically using accounting software, and are obligated to keep digital records of their transactions.

Manual submissions through the HMRC online services for VAT will no longer be accepted for most businesses.

Since April 2019, MTD rules have only applied to businesses with a VAT taxable turnover above the £85,000 threshold. But the government plans to roll out this digital transformation across the entire tax system. These are the deadlines so far:

  • April 2021: HMRC are no longer accepting VAT returns submitted the old way and the option is now removed from the HMRC website
  • April 2022: MTD for VAT applies to all VAT-registered businesses, so it makes sense to start MTD now to avoid problems later
  • April 2023: MTD for Income Tax applies to self-employed businesses and landlords with annual business or property income above £10,000
  • April 2026: MTD for Corporation Tax may come into effect for incorporated businesses and other organisations within the charge to Corporation Tax

The new VAT rules apply to most affected businesses and you must:

  • Ensure you have MTD for VAT compliant software.
  • Start maintaining digital business records for the purposes of VAT.
  • Sign up with HMRC for MTD for VAT.
  • Start submitting your VAT Returns through your compliant software.

If you run a VAT-registered business with a taxable turnover above the VAT registration threshold (currently £85,000) you are required to keep digital VAT business records and send returns using Making Tax Digital (MTD)-compatible software for VAT periods.

Businesses with a taxable turnover below the VAT threshold can also sign up for MTD for VAT voluntarily. This also applies to other VAT entities, such as charities, government bodies and limited companies. Here is a link with details from HMRC.

Yes. QuickBooks Online is fully MTD compliant. A key change is that from April 2019 HMRC will no longer provide online tools for digital submission of VAT returns. Instead, submissions must be done through commercial software for the following:

  • VAT-registered business with a taxable turnover above the VAT registration threshold (currently £85,000) you are required to keep digital VAT business records and send returns using Making Tax Digital (MTD)-compatible software for VAT periods after 1 April 2019.
  • Businesses with a taxable turnover below the VAT registration threshold can also sign up for MTD for VAT voluntarily. This also applies to other VAT entities, such as charities, government bodies and limited companies.

Keeping your records digitally for MTD purposes 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.

Watch this video by HMRC which explains digital record keeping in more detail.

Once you’ve reached the VAT registration threshold you must comply with the requirements of MTD. This is still the case even if your taxable turnover subsequently falls below the threshold, unless you meet one of the other exemptions detailed in the HMRC VAT Notice 700/22: Making Tax Digital for VAT.

Yes, you can submit a flat rate return through QuickBooks for MTD. Remember, before you can make a submission, you must enable MTD in QuickBooks and authorise QuickBooks to interact with HMRC.

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

Yes, but not for the same period. That is, if you've filed VAT return for a period from 01/01/2021–31/03/2021 successfully under MTD using QuickBooks, then you can't file the VAT returns for the missed period before 01/01/2021–31/03/2021.

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

If the accounts have the same VAT number, then you can combine the figures and submit them via the bridging tool.

If the companies have 2 different VRNs, then you cannot file those companies under 1 VRN.

If the companies are covered under 1 VRN, then you can combine the figures and submit them via the bridging tool.

See also

*QuickBooks MTD software currently supports Standard, Cash and Flat Rate schemes. QuickBooks Bridging Software supports Standard and Cash schemes. Annual submissions are not currently supported but will be coming soon. Businesses whose home currency is not GBP are currently not supported for MTD.

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