How to comply with electronic VAT, Making Tax Digital, or MTD in the United Kingdom
What is Making Tax Digital (MTD)?
Making Tax Digital is legislation that requires UK VAT-registered businesses to keep their accounting records digitally and submit their VAT returns electronically using HMRC-compatible software. The UK government’s objective is to reduce errors, simplify tax processes, and modernise the relationship between businesses and the tax authority.
VAT returns must be submitted to HMRC on a quarterly basis. However, businesses may opt to submit their VAT returns more frequently, as a way to maintain closer control over their accounts.
EDICOM’s MTD solution has been recognised by HMRC as both bridging software and digital VAT record-keeping software.
EDICOM offers a service capable of transforming required data into the format specified by HMRC, securely connecting to and automatically transmitting the VAT return, and electronically storing documents with all necessary data. EDICOM’s solution also receives and processes notifications from HMRC, which can be stored alongside the VAT reports.
MTD Compliance timeline
VAT-registered Businesses
- From April 1st 2019: Mandatory for businesses with a taxable turnover above the VAT registration threshold of £85,000.
- From April 2022: All VAT-registered businesses, regardless of turnover, must keep their VAT records digitally and submit them electronically to HMRC via API, without manual intervention.
Self-employed and Landlords
The government has announced the expansion of MTD to include Income Tax Self Assessment (ITSA).
- From April 2026: All self-employed individuals and landlords with annual income above £50,000 will be required to use MTD for income tax reporting.
- From April 2027: The requirement will extend to those with annual income above £30,000.
Implementing MTD involves transforming accounting and tax processes. Both businesses and sole-traders must:
- Automate their accounting systems.
- Establish digital data flows
- Train their teams or seek external solutions to ensure error-free compliance.
What do I need to work with the MTD Model?
- Automatic generation of VAT records in a structured format. The file must include the 9 fields currently reported through other means to HMRC.
- VAT due in this period on sales and other outputs.
- VAT due in this period on acquisitions from other EU member states.
- Total VAT due (sum of boxes 1 & 2).
- VAT reclaimed in this period on purchases and other inputs (including acquisitions from EU)
- Net VAT to be paid to or reclaimed from HMRC (difference between boxes 3 & 4).
- Total value of sales and all other outputs excluding VAT.
- Total value of purchases and all other inputs excluding VAT.
- Total value of all supplies of goods and related costs, excluding VAT, to other EU member states.
- Communication with HMRC: Connection to HMRC will take place via Web Service protocol using API, preferably in JSON format.
- Electronic storage of VAT records for 6 years.
What information must be archived electronically?
Businesses must digitally archive the following information for a period of 6 years:
- Business name
- Business address
- VAT registration number
- VAT accounting schemes
- VAT calculations
- Any adjustments applied
For purchase and sale of goods, the following must be recorded:
- Date of supply
- Net value
- VAT
- Adjustments or corrections made to VAT
- Total VAT
- Daily gross takings
EDICOM: Comprehensive solutions to comply with Making Tax Digital
Digital tax compliance is not just about meeting legal requirements — it is also an opportunity to optimise processes, reduce risk, and improve efficiency. At EDICOM, we specialise in integrating advanced tax technologies with internal business systems to ensure compliance, traceability, and security.
Our platform is designed to adapt to complex environments with multiple regulatory requirements, such as the UK’s. Key functionalities include:
- Direct integration with HMRC: Our solution is authorised and certified to communicate with HMRC’s systems via API.
- Connectivity with ERPs such as SAP, Microsoft Dynamics, Sage, Oracle, among others.
- Complete digitisation of the tax process, from data collection to VAT return submission.
- Automation of transaction logging, eliminating manual errors and ensuring the ‘digital links’ required by law.
- Secure retention of digital records for the legally required duration, in compliance with tax and data protection regulations.
