MAKING TAX DIGITAL – How VAT businesses and other VAT entities can get ready

Making tax digital

24 Sep MAKING TAX DIGITAL – How VAT businesses and other VAT entities can get ready

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 records and send returns using Making Tax Digital (MTD) compatible software for VAT periods starting on or after 1 April 2019

Businesses with a taxable turnover below can also sign up for MTD for VAT voluntarily. This also applies to VAT entities such as charities, government bodies and limited companies

In VAT notice 700/22 published on 13 July 2018 HMRC outlined its intention to give some respite to taxpayers who may struggle with the digital requirements. However, eventually, all businesses will be required to keep their records in a digital format and to have digital links between the software programs they use.

What are digital links?

VAT notice 700/22 states that a digital link is ‘an electronic or digital transfer or exchange of data between software programs, products or applications’.  Under MTD for VAT taxpayers are entitled to use more than one piece of software as long as they are digitally linked.

Types of digital links accepted by HMRC:

  • Linked cells in spreadsheets
  • emailing a spreadsheet with digital records to an agent so that they can import the data into software in order to carry out a calculation (such as for partial exemption)
  • transferring digital records to a portable device, such as a USB stick, to give to an agent to import into their software
  • XML and CSV import and export, and the download and upload of files
  • automated data transfer
  • API transfer.


HMRC is keen to emphasise that this list is not exhaustive. The Notice also states that ‘the use of cut and paste does not constitute a digital link’. However, in the first year of mandation, HMRC will ‘accept the use of cut and paste as being a link’ for the relevant VAT periods. In time, however, taxpayers will need to ensure that digital links are available between the software programs they use.

What software is compatible for MTD?

Here is a list of software suppliers HMRC is working with to produce MTD for VAT software for businesses and agents.

How can Prospero help you through MTD?

The Prospero team can lead you through the changeover and give advice and project management to streamline the process of becoming fully compliant. Call the team on 0161 242 7189 or email

If you would like to find out how we can help you or your business please call us now.