The deadline for businesses with a turnover above the VAT threshold to keep digital records for VAT purposes using Making Tax Digital (MTD), is almost here. For VAT returns periods starting on or after 1 April 2019, businesses with a turnover above the VAT threshold (currently £85,000) will have to: keep their records digitally (for VAT purposes only), and provide their VAT return information to HMRC through MTD functional compatible software. Businesses need to sign up for MTD for VAT in order to submit VAT returns digitally. In a recent update, HMRC has clarified that businesses that pay VAT by Direct Debit cannot sign up in the 7 working days leading up to, or during the 5 working days after sending a VAT Return. Penalties eased during first year HMRC has confirmed that during the first year of the changes, they will take a light touch approach to digital record keeping and filing penalties where businesses are doing their best to comply with the law. HMRC is clear that this does not mean a blanket 'no penalties promise' and businesses need to do their best to meet the MTD requirements. HMRC has also said that no business will be forced to go digital for their VAT returns if they are unable to; any businesses that are currently exempt from online filing of VAT will remain so under MTD. There are also provisions for those who cannot adapt to the new service due to age, disability, location or religion, to apply for an exemption. If your business has a turnover under the VAT registration threshold, you are not currently mandated to use the MTD for VAT service but can opt to do so if you wish.