Making Tax Digital for VAT is about the route from your transaction records to your submitted return. Buying accounting software is a starting point; you also need a workable process for entering information, checking it and moving it between systems.
In this article
- Confirm your VAT record requirements
- Choose suitable compatible software
- Check how digital records connect
- Review figures before submitting
HMRC requires VAT-registered businesses to follow the digital record and compatible software rules unless an exemption applies. These requirements are separate from Making Tax Digital for Income Tax. The authoritative starting point is VAT Notice 700/22.
Map your records before choosing software
List where sales, purchases, adjustments and supporting documents currently live. A business might have an online shop, a point-of-sale system, supplier PDFs, a spreadsheet and an accounting ledger. Ask where information is first entered and how each later system receives it.
Your map should identify the person responsible at every stage. Without that, a technically compatible system can still produce an incomplete return because nobody imports a payment processor statement or checks supplier credits.
| Record stream | Useful questions |
|---|---|
| Sales | Are refunds, delivery charges and different VAT treatments captured? |
| Purchases | Who checks VAT codes and supporting invoices? |
| Bank and payment accounts | Are fees, transfers and unsettled balances reconciled? |
| Adjustments | Who prepares, approves and records the workings? |
| Return submission | Who reviews the totals and retains the receipt? |
Use this map to compare software against the business rather than choosing solely from a feature list.
What has to be digital?
HMRC’s notice specifies digital business information and supply records, including the time and value of supplies and the VAT information required for sales and purchases. It permits particular recording approaches in some circumstances, including certain schemes. Read the relevant sections rather than assuming every business records transactions identically.
This does not mean every original document must be born digital. Paper invoices can still feed a digital bookkeeping process. What matters is meeting the digital record requirements while keeping suitable evidence. HMRC’s VAT record-keeping guidance explains the wider record obligations.
For day-to-day organisation, give attachments clear names or references and link them to ledger entries. A scanned invoice sitting in a folder is useful evidence, but it does not automatically become the structured transaction record needed by your software.
Understand digital links
Where several software products together hold the required records and prepare the return, transfers within that arrangement generally need digital links. HMRC does not accept copying and pasting as a digital link. Transfers such as linked spreadsheet cells or appropriate imports can qualify; see the examples in Notice 700/22.
The practical test is to follow a figure. Can you show how a sales total travelled from its records into the return, without somebody manually retyping the required transfer? Distinguish initial manual entry from later movement between software products. They are different stages with different considerations.
Keep a simple written description of imports and connections. Include export formats, mapping settings and who checks that all expected files arrived. This is especially helpful when a bookkeeper is absent or the business changes software.
Spreadsheets can still have a role
A spreadsheet is not automatically excluded. A suitable spreadsheet arrangement with compatible bridging software can support submission, provided the complete process meets the rules. HMRC maintains a compatible VAT software search.
Before committing, ask how authorisation works, which VAT schemes are supported, how corrections are recorded and what happens when a connection expires. Consider access controls, export options and support quality alongside the submission feature. Avoid treating an appearance on a software list as a promise that it suits every transaction in your business.
An illustrative workflow
Imagine a retailer using a till system, a purchase ledger and bridging software. This example is illustrative. The owner previously typed a quarterly sales total into a spreadsheet from a printed report.
They review the arrangement and establish an appropriate electronic export and import process, preserving the necessary records and links. Each month they check sales against till reports and payment settlements, investigate refunds and reconcile purchase entries to invoices. Before submission, they review the VAT account and unusual codes.
The improvement is not just electronic filing. A missing day of sales or an incorrectly classified supplier invoice now has a named place to be detected.
Put review before submission
Set an internal deadline earlier than the filing deadline. Reconcile relevant accounts, resolve material queries and compare the return with earlier periods. Explain large changes rather than assuming they are errors. Retain approved workings and the submission confirmation, and arrange payment separately.
If digital access is impractical because of circumstances covered by HMRC’s rules, investigate the MTD exemption application. Do not simply stop using compatible software without resolving your position.
To discuss records, software handovers or return preparation, contact EPOS Accountancy’s VAT service with your current workflow and any recurring difficulties. Agree which tasks you retain and which are included; see pricing for fee information.