How MTD works and how to comply with it

To comply with MTD a business or its agent (typically their accountant) must keep their records electronically. In other words, when a tax return of any sort is made to HMRC, it must be possible to look at the records that justify the tax return and those records must be held on a computer.

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MTDBenjamin Dyer
Why is MTD being introduced?

Different explanations have been given in different forums, however, the most likely driver for MTD is to recover more tax – the so called “Tax gap”. HMRC also explain that having digital records will make businesses more efficient and they are probably right. However, that is likely to be at the cost of shorter term problems as anyone who has implemented a new system will testify.

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What is MTD for VAT?

MTD for VAT is the specific phase of MTD covering VAT returns made by businesses to HMRC. These VAT returns will need to be made through the new MTD for VAT system but importantly the sales and invoices that make up the VAT return must be stored on computer and linked through to the VAT return. That’s the big difference from the current web form for VAT returns that 98% of businesses use already.

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