UK MTD 2020 - Some major Reforms for Businesses

UK MTD 2020: Some Major Reforms for Businesses

MTD for VAT in the UK is the talk of the town. Everyone wants to be MTD compliant to avoid any kind of issues. But, little did people know that after the end of UK HMRC’s “soft landing”, phase 2 is what will create more issues for them. But there are four reforms that will affect millions of VAT registered businesses in 2020.

Many businesses have already filed on the new HMRC MTD platform after it was introduced in April 2019. Now that part was a little easy, ending the soft lading in April 2020. Businesses will have to prepare themselves for the upcoming changes. There are talks that the April 2020 phase will have some challenges. Let’s look at the changes and their possible effects on the businesses this 2020.

Some Facts

There has been an increase of 5.3% in Total VAT receipts in 2018-19.

There has been an increase in the number of registration in 2018-19, as compared to the 2017-18 cycle. In the 2017-18 the de-registration had reached an approximate 2,50,000 traders but in 2018-19 cycle the registration have gone more than 2,50,000 traders and de-registrations were below 2,50,00 traders.

Digital Bookkeeping

The greatest shift will be seen in many small enterprises that keep their records in a summary in Excel or on paper. The 2020 amendments obligate these enterprises to digitalize their records of supplies received and made, with the time of supply, value and VAT rate.

Besides sales, digital bookkeeping will be extended to the purchases, stocks and fixed asset transactions. This will have a tendency of leading to the small companies buying some fundamental accounting packages for the first time – which ought to be MTD compliant for filing, too. But many businesses will remain with bridging the software for MTD to sustain the data if it still has the capability of transferring the data to HMRC without any human intervention.

Digital Journey

The second shift will affect mostly the large and medium-sized businesses. From April 2020, the transmission of data between invoice and accounting systems must be done using digital links. This clearly means no manual recording, including forgery, consolidation or error corrections in spread Sheets. There will be no more copy-paste or cut-paste. Nevertheless, if they can make sure of an uninterrupted digital journey right between their invoices and accounting systems to the bridging software and then to the HMRC, there should be no issues in continuing the same route. But, detailed off-software calculations, like partial exemption, will continue to be exempted from the digital journey obligations.

This will be a challenge to businesses that have multiple accounting systems or group accounts. These businesses combine all the numbers manually for the return in a spreadsheet. are the companies that will need to find a way – investment or very complex Excel macros – to do this without human intervention. The answer may be interconnecting all systems or investing in a VAT software that digitally extracts, merges, permits digital modifications and then files via the MTD API.


To boost the whole MTD regime, the deferment of penalties on late MTD filings will end, too. This is done on a collective basis, based on the number of breaches in the past 12 months. This can reach 15% of the VAT due, plus the penalties of up to 100% of undeclared VAT as a result of negligent or intentional errors.

In short, all the hard work and the software investment will be from April 2020. So, all businesses need to buckle up. If 2019 was just a small change in the tax world, 2020 is will be an epic shift for VAT.

VAT Automation Solutions

Automation is another and major shift that makes MTD for VAT in the UK very easy. Automation eases the filing process and makes life easy for all medium and large-sized businesses. HMRC has also approved a few of the VAT automation software to be used for MTD.

Cygnet R7VAT is one of best the VAT automation software recognized by HMRC in the UK. Cygnet R7VAT simplifies the process of preparing VAT returns for companies of all sizes. It offers an end to end automation that extracts source data from various business systems, performs extensive validations as per the VAT laws, prepares the VAT return and allows the user to file the return directly through the tool.

If you are worried about the changes that this year 2020 will bring for VAT, then you can get in touch with our VAT automation experts who will guide you throughout the process. To have a free demo of R7VAT write us at or call us at +44-20-8099-1653.

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