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Stay ahead of upcoming changes to UK VAT submissions

Posted 2 years ago in Advisors by Damon Anderson
Posted by Damon Anderson

It’s been a difficult year for many small businesses in the UK. They have had to contend with challenges around COVID-19 as well as uncertainties associated with Brexit. And that’s before we take into account upcoming changes to Making Tax Digital (MTD).

Since it was first implemented in the UK almost two years ago, there have been a number of important changes to the way small businesses manage and report their tax. We understand that it isn’t always easy to stay on top of these types of changes. So we are doing everything we can to keep you updated, so you can prepare. 

New changes to MTD

The next major milestone is for all VAT-registered businesses to sign up to MTD for VAT by April 2022. After that date, all VAT-registered businesses will need to keep digital records and submit their VAT Returns using MTD from within Xero or other API-enabled software.

HMRC has also recently announced that non-MTD VAT submissions using software providers will no longer be supported from April 2021. This means that quarterly VAT periods ending in December, January or February 2021 will be the last that you can submit in Xero using the old VAT Return. 

How to prepare for this change

To prepare for this change, you have two options:

  • The first is to sign up to MTD for VAT voluntarily (please remember that you’ll be mandated to join MTD from April 2022).
  • The second is to generate VAT amounts using our new non-MTD VAT Return in Xero, which is designed for businesses who are not ready for MTD (such as those under the VAT threshold or part of a VAT group.) If you choose to use the non-MTD VAT Return in Xero, you will be required to submit the return manually using HMRC online services or by using MTD bridging software.   

This will be available from 23 November 2020 and is designed for use if you’re not ready to make the move to MTD. It will also be the default option for new trials and subscriptions moving forward.

You may notice that the new non-MTD VAT Return looks very similar to the existing MTD one. We did this intentionally, so it will be easier for businesses to transition to MTD VAT Returns in the year ahead.

This includes all the functionality of our existing MTD VAT Return for generating VAT amounts, as well as some new features that will improve your workflow. For example, the ability to calculate late claims for a previous VAT period.

Start preparing now

While there is some time before you will no longer be able to submit non-MTD VAT returns via Xero, it’s a good idea to start preparing your business early. We’ll keep you updated on further improvements to Xero Tax too, as we continue to stay ahead of MTD changes and make it easy for your business to stay compliant.


November 19, 2020 at 4.45 am

MTD for non-established taxable persons (NETP) has not been finalised. We expect that to be mandatory in April as well.

We have all of our NETP clients on MTD already, using a simple bypass at HMRC registration which is now also suggested by HMRC. We use Xero to prepare their returns, but again have adapted whilst maintaining a full audit trail into, for example, SAP systems.

We are yet to migrate to csv uploads or API transfer of data, but they are on the horizon.

We chose Xero because it is a well respected international brand, it is fairly intuitive, we can open it up to clients for information sharing and posting but actually for something far more important than that. Xero get to deal with the changes in programming (which will inevitably come with, for example, mandatory HMRC audit access, and we knew that MTD is to be rolled out and want to be able to use it for CT and personal tax (when that joins in as it will).

We did consider using an excel patch, but that made no sense as we knew it would be superseded within a couple of years.

I wouldn’t say getting Xero up and running has been painless, but I realise part of that was my learning curve. There are parts of the system I’m not keen on (including the way the interface with HMRC online works) and I have passed on some comments and suggestions to Xero.

One last point, I believe that the religious exemption from doing it online has been respected and that these people may not be forced to use MTD.

Beeny Atherton in reply to Steve Botham CTA MAAT AIIT MIEx Xero
November 19, 2020 at 9.47 am

Thanks so much Steve for sharing your experience to date. If there is anything you need a hand with in the future, you know where to find us.

November 25, 2020 at 2.37 am

I’m unable to find any information or guidance from HMRC concerning the statement above that

“HMRC has also recently announced that non-MTD VAT submissions using software providers will no longer be supported from April 2021. ”

Can anyone provide a link or some other resource for this?


Beeny Atherton in reply to Darren Xero
November 26, 2020 at 10.09 am

Hi Darren, thank you for getting in touch. In regards to the announcement – we received an email from HMRC informing us that as part of their ongoing transformation and to support this transition, they need to make changes to the IT infrastructure, which involves migrating customer accounts to a new back end system. This migration will consolidate all customers on one system and allow decommissioning of the old VAT system. This means that from 8 April 2021, they will no longer be able to accept XML VAT submissions from third party software. If you have any further questions in relation to this, I recommend getting in touch directly with HMRC who will be able to provide you with more information. Hope that helps!

Valerire Jepson
March 4, 2021 at 5.02 am

With reference to Beeny’s reply to Darren. Please confirm that your response means that Xero will still produce the VAT Return files in XML format and thus are not HMRC compliant from 8 April 2021.

Thank you

Beeny Atherton in reply to Valerire Jepson Xero
March 9, 2021 at 1.50 pm

Hi Valerire – as of the 8th April this year, HMRC will no longer be supporting XML VAT submission from software. To support these changes, we are looking to retire the old VAT return (that includes XML filing) after 8th April and we’re pleased to say that the new VAT options are already available in Xero. As further changes take effect impacting VAT returns, Xero will manage and maintain compliance in the new VAT solutions. You can find out more about the different tax solutions as well as any upcoming changes relating to payroll and tax in our Tax Lab here. I hope that helps.

June 4, 2021 at 10.50 pm

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