MTD is an HMRC service that requires businesses to keep digital records and file VAT returns using compatible software.
Mandatory over £85k, optional under £85k until 2022.
The software must connect with HMRC’s system.
Businesses must keep digital records of VAT data.
Most Xero plans allow you to keep digital records and submit VAT online through HMRC’s MTD system.
Generate, review and submit VAT returns in Xero once you’ve signed up for MTD.
Xero’s Making Tax Digital (MTD) software works for both VAT and non-MTD VAT returns. But once you sign up for MTD, you can only submit MTD VAT returns. You won't be able to return to the old VAT return to view or publish.See how to set up MTD for VAT in Xero
If the domestic reverse VAT charge applies to you, you need to use the standard (not flat) rate MTD VAT return in Xero. Xero has specific tax rates set up for use on invoices and bills in order to report the right amounts on the VAT return.See how to apply the domestic reverse charge in Xero
If you use spreadsheets for VAT, you can still connect to HMRC’s MTD system via Xero. Xero provides a tool that lets you upload VAT amounts, then send MTD VAT standard rate returns from Xero.See how to get VAT data into Xero from spreadsheets