Not yet signed up for Making Tax Digital (MTD) for VAT?

18 Dec 2020

The way in which you file your VAT return may be changing in April 2021…

Making Tax Digital (MTD) – a scheme that requires online tax filing and digital record keeping.

Making Tax Digital will affect all business taxes at some point in the future, and some VAT registered businesses, with a taxable turnover above £85,000 have already seen changes in the way in which they prepare and file their VAT returns.


For VAT registered businesses with a taxable turnover beneath £85,000, the requirement to sign up and comply with Making Tax Digital for VAT is not compulsory until April 2022, although the option to voluntarily sign up to Making Tax Digital is available.

HMRC currently hold VAT records across two databases – a newer database to hold VAT records for businesses signed up for MTD and an older database, currently used to hold the VAT records of businesses who are not yet signed up to MTD. In preparation for April 2022, when all VAT registered businesses will be required to comply, HMRC will be merging the old database to the new, in April 2021.

How will this impact my business?

Submission of the VAT return

Signed up to Making Tax Digital and file through software

If you are already signed up to Making Tax Digital, the merge of the two databases will have no effect, as HMRC already store your VAT records on the new database.

Not signed up to Making Tax Digital and file through HMRC’s website

If you are not yet signed up to Making Tax Digital and currently submit your VAT return through HMRC’s website by typing in your return figures into the nine boxes, the same nine boxes will appear, but will look different.

(Please note: the option to file your VAT return through the website will only be available until April 2022 – after this date you will need to file through software under MTD)

Not signed up to Making Tax Digital, but file through software

For businesses not signed up to Making Tax Digital, but already file their VAT returns through accounting software, such as Xero, Sage or QuickBooks, the option to file through software will no longer be supported after April 2021.

There are two options available:

  • Sign up to MTD voluntarily – it will be mandatory to do so* from April 2022, however please ensure your software is MTD compatible before doing so – check with your software provider if you are unsure.  You will need to follow all MTD rules including digital record keeping, digital links and submissions.

  • Generate your VAT return using your software, but file your return manually using HMRC Online services. Please note for some software packages you may need to also mark your VAT return as being filed outside of your software.

HMRC have notified software providers of the changes, so be prepared for the layout of your VAT return to look a little different…

Not certain whether you are signed up to Making Tax Digital or not?

The best place to confirm this will be through your online VAT account with HMRC – if the portal allows you to file your VAT return directly online, it is likely that you are not signed up to MTD. Your VAT account should indicate if you are signed up to MTD.

Payment of your VAT Liability

Businesses that pay VAT by direct debit will be asked by HMRC to either supply or confirm their e-mail address by 28th February 2021. This will be to allow HMRC to comply with banking regulations, by notifying businesses of the date and amount which will be taken by direct debit.

HMRC will be unable to collect VAT payments by direct debit if a valid e-mail address is not provided.

*Some businesses may be eligible for an exemption from MTD – for more details on this, please visit:

Here to help

If you have any queries with the above or require any support please contact us on 01743 273273 or e-mail

Written by Sally Fisher | Digital Solutions Advisor

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