How to keep VAT submissions accurate in a digital-first world

Digital transformation has changed the way UK businesses manage tax. With HMRC’s Making Tax Digital now fully in place for VAT-registered businesses, accuracy is no longer just good practice, it is a legal requirement. Submitting incorrect VAT returns can lead to penalties, cash flow problems and wasted time correcting mistakes. 

Why accuracy matters more than ever 

Making Tax Digital requires businesses to keep digital records and submit VAT returns using compatible software. This means every figure you report should match the underlying data in your system. Errors can result in penalties under HMRC’s points-based system, delays in reclaiming VAT and even compliance reviews. 

Accuracy also protects your reputation. A clean VAT process signals that your business is organised and financially sound. It reassures suppliers and clients that you take compliance seriously. 

What Making Tax Digital means for VAT 

• Keep digital records of all VAT-related transactions. 

• Submit VAT returns through HMRC-approved software. 

• Retain records for at least six years. 

These rules apply to most VAT-registered businesses. If you are unsure whether you qualify, check HMRC guidance or speak to your accountant. Deadlines and thresholds can change, so always verify the latest requirements. 

Building an accurate VAT process

The foundation of accuracy is good record-keeping. Every transaction should be captured digitally. Avoid systems where some data is on paper and some in software, as this creates gaps and increases the risk of errors. 

Choosing the right software is essential. Look for platforms that integrate directly with HMRC and allow secure VAT submissions. Cloud-based systems are ideal because they provide real-time updates and multi-user access, making collaboration easier. 

Once your system is in place, make reconciliation a regular habit. Compare your VAT control account with bank statements and invoices each month. This helps you catch discrepancies early and avoid last-minute surprises. 

Automation can also improve accuracy. Features such as bank feeds and invoice scanning reduce manual entry and save time. However, automation is not a substitute for oversight. Always review your VAT return before submission. Check for incorrect VAT codes, missing invoices and duplicate entries. A short review can prevent costly mistakes. 

Common pitfalls to avoid

Many errors happen because businesses rush at the last minute or rely on outdated processes. Common mistakes include: 

• Using non-compatible software.
• Forgetting to update VAT rates.
• Failing to account for partial exemptions or reverse charges.
• Leaving record-keeping until the deadline. 

These issues can lead to incorrect submissions and potential penalties. 

Should you outsource VAT compliance?

More UK businesses are outsourcing bookkeeping and VAT to specialist providers. This approach offers expert oversight, efficiency and peace of mind. Outsourcing does not mean losing control. Modern providers use collaborative cloud systems so you can view data in real time and approve submissions before they go to HMRC. For businesses with complex VAT scenarios or limited internal resources, outsourcing can be a smart move. 

Preparing for the future

Digital compliance is here to stay. To future-proof your VAT process: 

• Keep your software up to date and HMRC-compliant.
• Train staff on digital record-keeping.
• Review your processes regularly.
• Seek professional advice for complex VAT situations.