Under Making Tax Digital (MTD) for VAT, known as 'Making VAT Digital' (MVD), most VAT businesses are required to use 'functional compatible' software in order to report VAT.'

This means that:

• They must use appropriate software to record to their business transactions.
• The software must be able to connect to HMRC's MTD system
• They must activate their software to ensure it connects to HMRC's MTD system.
• They must set up to pay VAT via direct debit.

Start dates:

• MVD commenced for VAT quarters commencing on or after 1 April 2019, unless the business is deemed as complex, in which the start is deferred until October 2019.
• Businesses which are registered for VAT after 31 March 2019 are automatically within MTD.

 MVD applies to:

• VAT registered businesses with turnover exceeding the VAT Registration threshold.

Penalties

• There will be no late payment penalties if your direct debit was not set up in time.
• There will be no late penalties if you tried to set up for MTD but failed.

Full details: see Making VAT Digital section