What is Making Tax Digital (MTD)?

Making Tax Digital is an HM Revenue and Customs (HMRC) initiative designed to make sure the UK tax system is effective, efficient and simpler for VAT registered businesses. FreshBooks’ MTD portal allows you to submit your VAT Returns with the HMRC, as well as review past submissions, VAT liabilities and VAT payment history.

Once your VAT profile is configured and signed in with the Government Gateway, you can then submit returns to the HMRC directly using the below steps:

Create your MTD Account
Access your MTD Account
Submit a Return
VAT Return Calculations
FAQs

Create your MTD Account

The below steps will allow you to connect with the Making Tax Digital app and set up your VAT profile with your Government Gateway login, if you haven't done so already:

Connect to Making Tax Digital

If you’re an accountant, you can access the MTD portal via the VAT Return Report instead. Otherwise, set up your connection to the MTD portal with these steps:

In your FreshBooks account, select the Apps section
Then in the FreshBooks MTD app, select the Install Now link
In the Connect to FreshBooks MTD window, select the Allow button to authorize FreshBooks MTD to access your FreshBooks account information
Proceed to the Configure your VAT Profile steps below to continue your setup.

Configure your VAT Profile

In the Making Tax Digital portal, next to Step 1, select the Configure your VAT Profile link
In Edit your VAT Profile, enter your VAT Number in the field provided
For your VAT Scheme, choose between Standard or Flat Rate (learn more about Flat Rate schemes here)
1. For Standard schemes, next to Accounting Method, choose between Cash or Accrual
2. For Flat Rate schemes, next to Flat Rate to use, specify the percentage rate
Then under Your HMRC Authorisation, select the Authorise Now link, a new browser window will open
Select Continue
In the new HMRC browser window, select the Continue button and then select the Sign into Government Gateway button
Enter your Government Gateway user ID and Password, or if you don’t have one, select the Create sign in details link instead
Select the Give permission button to finish setting up the connection
Once authorisation has been confirmed, close the HMRC window, return to your Making Tax Digital Portal and select Save Settings to finish setting up your VAT profile.

In the Making Tax Digital hub, if Step 1 and Step 2 is completed with green checkboxes, your MTD account is now set up and is ready to submit returns to HMRC directly:

Making tax digital hub setup with two green checkmarks next to links.

Access Your MTD Account

To access your MTD account anytime after completing the setup, use the below steps:

In your FreshBooks account, select the Apps section
Under Connected Apps, next to FreshBooks MTD, select the Open App button. The app will open in a new browser window.

Select the Actions button to do any of the following:

Submit a Return - Upload your CSV and submit your VAT Return for your business to the HMRC directly
Past Submissions - View all your previously submitted VAT Returns and any responses from the HMRC
Liabilities - Access your current VAT liabilities
Payments - View your VAT payment history
Settings - View your VAT profile and your HMRC authorisation
- Next to Reset authorisation, select Reset Now to disconnect your HMRC account from your MTD portal

Submit a Return

If you haven't filed a VAT Return, review VAT Return Calculations below first. To submit your VAT Return, use these steps:

In your FreshBooks account, select the Apps section
Under Connected Apps, next to FreshBooks MTD, select the Open App button, the app will open in a new browser window
If not logged into your MTD account, sign in
Select the Start a Submission button
Next to Period to file, choose a Period from the dropdown
Your VAT Return report will automatically be uploaded for you - confirm that your totals look correct
If needed, select the pencil icon next to any number to make adjustments to the total
1. In the Notes field, specify the reason for the adjustment entry
2. Next, add a positive or negative total in the Adjustment Amount field
3. If needed, select the + Add an Adjustment button to add additional adjustments
4. Select Save Adjustment to finish
Once you’re done reviewing your VAT Return, check off the box next to I confirm that this VAT period is finalised and includes all relevant transactions
Select the Submit button
A confirmation will appear, and you can find your recent submission in the Past Submissions section under the Actions button. Viewing past submissions will also include the View PDF and Print button to save your submission offline.

Notes on Adjustments:

Adjustments can be made for:
- Capital purchases over￡2,000 (including VAT) to reclaim VAT (Box 4 and Box 7 for Flat Rate scheme)
- Late claims
- Missing information from the current period such as income from other sources not captured in your General Ledger, sales and expenses made before you created your FreshBooks account, and anything else that was not captured properly in your FreshBooks account
- Purchases made before your VAT registration date
- Refunds on sales made in previous quarters’ submissions
Only boxes 1-2, 4, and 6-9 can be directly adjusted
To reverse an adjustment, enter another adjustment for the opposite amount

VAT Return Calculations

Calculations are made based off the VAT Scheme selected:

Accrual - Based on invoice date, looks at all Invoices except draft invoices
Collected - Based on payment date, looks at only paid invoices, does not include partially paid Invoices
Flat Rate - Based on percentage of your total turnover

For more details on how to fill in each box on your return, review HMRC’s details here.

Box	Description	Calculation Notes
Box 1	VAT due in this period on sales	Sum of VAT collected from ￡GBP invoices for all methods. For the Accrual method only, this also includes other income and Checkout Link payments. For Flat Rate scheme, the sum is multiplied by the Flat Rate to use percentage specified in your VAT Profile above.
Box 2	VAT due in this period on acquisitions of goods made in Northern Ireland from EU Member States	Defaults to £0.
Box 3	Total VAT due	Sum of Box 1 and Box 2.
Box 4	Total VAT reclaimed in this period on purchases (including acquisitions in Northern Ireland from EU member states)	Sum of VAT recorded from ￡GBP expenses and bills. For Flat Rate scheme, this defaults to £0.
Box 5	Total VAT due to HMRC or to reclaim	Total of Box 3 minus Box 4.
Box 6	Total value of sales, excluding VAT	Sum of all sales from ￡GBP invoices for all methods. For the Accrual method only, this also includes other income and Checkout Link payments (excluding VAT).
Box 7	Total value of purchases, excluding VAT	Sum of all ￡GBP expenses recorded from expenses and bills, excluding amounts from non-VAT expense categories and 0% VAT. For Flat Rate scheme, this defaults to £0.
Box 8	Total value of dispatches of goods and related costs (excluding VAT) from Northern Ireland to EU Member States	Defaults to £0.
Box 9	Total value of acquisitions of goods and related costs (excluding VAT) made in Northern Ireland from EU Member States	Defaults to £0.

FAQs

Where can I find my VAT Return Report?

To access your VAT Return report anytime as needed, you can use the steps in What is the VAT Return report? here.

Can I use this to file my personal income (SA100)?

The MTD portal is for VAT/corporation tax only. Personal income can be filed using one of our apps here instead.

Why are my past filings missing and the MTD portal is making me connect to the HMRC again?

To ensure your data is secure, the HMRC authorisation expires every 18 months. You can re-authorise again with the below steps:

In your FreshBooks account, select the Apps section
Under Connected Apps, next to FreshBooks MTD, select the Open App button, the app will open in a new browser window
Select Submit a Return
Then select Authorize with HMRC
In the new browser window on the HMRC website, select Continue button
Enter your Government Gateway User ID and Password then select Sign in
Then enter your Access Code and select Continue
Select the Grant authority button to finish. Your connection will be re-authorised again and past filings will show up again in your MTD Portal if there are any.

If you've forgotten your Gateway ID, you can reach out to HMRC's Online VAT Helpdesk here.

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