--- title: VAT and Making Tax Digital (MTD) – don’t risk a penalty description: If you have yet to sign up for MTD you must now, by law, use MTD compatible software to keep your VAT records and file your VAT returns. image: https://blog.shorts.uk.com/hubfs/MTD-VAT.jpg --- [![Shorts_logo_White](https://blog.shorts.uk.com/hubfs/New%20Site%202018/Shorts_logo_White.svg "Shorts_logo_White")](https://www.shorts.uk.com/) [Blogs & News](https://blog.shorts.uk.com/) > [VAT](https://blog.shorts.uk.com/topic/vat) # VAT and Making Tax Digital (MTD) – don’t risk a penalty Lynne Gill - 16 September 2022 ###### Select topic - Please Select - [ Audit ](https://blog.shorts.uk.com/topic/audit) [ Business Taxes ](https://blog.shorts.uk.com/topic/business-taxes) [ Radius – R&D Tax Relief & Patent Box ](https://blog.shorts.uk.com/topic/radius-rd-tax-relief-patent-box) [ Corporate Finance ](https://blog.shorts.uk.com/topic/corporate-finance) [ GENUS Management Accounts ](https://blog.shorts.uk.com/topic/genus-management-accounts) [ VAT ](https://blog.shorts.uk.com/topic/vat) [ Private Client ](https://blog.shorts.uk.com/topic/private-client) [ Payroll ](https://blog.shorts.uk.com/topic/payroll) [ EOT ](https://blog.shorts.uk.com/topic/eot) [ International Taxes ](https://blog.shorts.uk.com/topic/international-taxes) ![featured image](https://blog.shorts.uk.com/hubfs/MTD-VAT.jpg) If you are registered for VAT, you must submit your VAT returns using MTD software or bridging software (unless you qualify for exemption).  ## MTD obligations All VAT-registered businesses are required to sign up for MTD. Businesses applying for [VAT](https://blog.shorts.uk.com/what-is-vat) registration online are automatically signed up for MTD. Businesses are required, by law, to use MTD-compatible software to keep VAT records and file VAT returns. Failure to do so can lead to a penalty of up to £400 per VAT return in addition to daily penalties of between £5 and £15 for failure to keep digital records, or failure to use ‘digital links’ to transfer or exchange data between different pieces of software. - [Read more: MTD and VAT - Making Tax Digital in 2022](https://blog.shorts.uk.com/mtd-and-vat-making-tax-digital-in-2022) ## Exemptions from MTD You can apply to HMRC for exemption if it’s not reasonable or practical for you to use computers, software or the internet to follow the rules for Making Tax Digital for VAT. HMRC considers applications for exemptions on a number of grounds, including: - Age, health condition, disability or where you live - Objection to using computers on religious grounds - No access to the internet ## How to avoid a penalty from HMRC To help you avoid a penalty, HMRC have produced a fact sheet (CC/FS69) which clarifies that you must: - **File your VAT return using functional compatible software** — you can find details of MTD-compatible software on the GOV.UK website. You may be able to get a discount of 50% on compatible accounting software through the UK government's Help to Grow: Digital scheme. - **Keep records digitally —** a list of records which need to be kept digitally is included in the factsheet. - **Use**** the checking functions within your software** — use of the checking functions helps to reduce the risk of errors on your VAT return. [Penalties](https://blog.shorts.uk.com/vat-penalties-from-january-2023) are imposed for submitting an incorrect VAT return and HMRC may view not using the checking function as ‘deliberate’ or at least ‘careless’ behaviour for penalty purposes, thus increasing the penalty charged. - **Sign up for MTD and li****nk your software to the MTD portal** — there is help and guidance on the GOV.UK website but HMRC advise you get in touch with your accountant to help guide you through the process. Here at Shorts we are able to submit VAT returns on your behalf through our own agent MTD account. Please get in touch with our [VAT Advisory Services](https://shorts.uk.com/vat-consultancy-planning/) if this is an option you would like to consider. ![author](https://blog.shorts.uk.com/hubfs/ZT_cPBSU-1-1.jpeg) #### Lynne Gill My area of expertise is land and property transactions but I have extensive knowledge of both domestic and international VAT and I love complex VAT queries. I have an Honours degree in Business Studies and a VAT legal and technical qualification from the Institute of Indirect Taxation. [View my articles](https://blog.shorts.uk.com/author/lynne-gill) Tags: [VAT](https://blog.shorts.uk.com/topic/vat), [Business Taxes](https://blog.shorts.uk.com/topic/business-taxes) Share this on - - - [Questions? Get in touch with us](https://www.shorts.uk.com/contact/) ###### Tax Saving Guide 2026-27 Written especially for entrepreneurs and owner-managed businesses, this guide is full of planning ideas and tax risks to avoid. [ Download now ](https://info.shorts.uk.com/en-gb/tax-saving-guide) ![Tax saving guide 2026-27](https://blog.shorts.uk.com/hs-fs/hubfs/Tax%20saving%20guide%202024.jpg?width=375&height=465&name=Tax%20saving%20guide%202024.jpg) ###### Related articles ##### [MTD and VAT: Making Tax Digital in 2026](https://blog.shorts.uk.com/mtd-and-vat-making-tax-digital) ##### [How does VAT work for leased cars and vehicle purchases?](https://blog.shorts.uk.com/vat-on-leased-cars-and-commercial-vehicles) ##### [Opportunity for Non-VAT Registered Ambulance Providers](https://blog.shorts.uk.com/non-vat-registered-ambulance-providers) ##### [VAT penalties from January 2023](https://blog.shorts.uk.com/vat-penalties-from-january-2023) ###### Latest articles [A case of aggressive tax avoidance: Glasgow Rangers Football Club](https://blog.shorts.uk.com/aggressive-tax-avoidance-affect-you) [What is VAT? - Complete Guide (Updated for 2025/26)](https://blog.shorts.uk.com/what-is-vat) [Ashgate Hospice Sparkle Night Walk 2026](https://blog.shorts.uk.com/ashgate-hospice-sparkle-night-walk-2026) [Stocktaking guide for UK businesses](https://blog.shorts.uk.com/stocktaking-guide-for-uk-businesses) [Supporting the Chatsworth Cascade for future generations](https://blog.shorts.uk.com/supporting-the-chatsworth-cascade-for-future-generations) [Deal of the Year win at Insider Dealmakers Awards 2026](https://blog.shorts.uk.com/deal-of-the-year-win-at-insider-dealmakers-awards-2026) [Football shirt Wednesday: Backing England in style](https://blog.shorts.uk.com/football-shirt-wednesday-backing-england-in-style) [Understanding lifetime trusts: the basics](https://blog.shorts.uk.com/understanding-lifetime-trusts-the-basics) [Close company directors face new HMRC detail requirements in 2026](https://blog.shorts.uk.com/close-company-directors-face-new-hmrc-detail-requirements-in-2026) [Shorts advise Harris Irwin Architects on successful growth funding.](https://blog.shorts.uk.com/shorts-advise-harris-irwin-architects-on-successful-growth-funding) #### About Us Use this little footer to reinforce your message about who you are and why people love working with you. 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