Top 5 Common Mistakes Businesses Make with MTD
Making Tax Digital (MTD) is HMRC’s initiative to modernise the UK tax system. For businesses, it means replacing paper-based processes with digital record-keeping and online submissions. While the benefits of MTD include better accuracy and improved efficiency, many businesses still struggle to adapt which is often due to simple but critical mistakes.
In this article, we explore the five most common MTD errors businesses make, and how to avoid them to stay compliant and stress-free.
1. Poor MTD Record Keeping
Digital record-keeping is the cornerstone of MTD, but many businesses still fall short.
Paper-based or spreadsheet records are not enough
HMRC requires digital records for all VAT-related transactions. Manually updating spreadsheets or storing paper receipts no longer meets compliance standards.
Broken digital links between systems
Copying and pasting figures between systems isn’t allowed under MTD. HMRC mandates “digital links” which are direct, uninterrupted data flows between your accounting software and submission tools.
Incomplete audit trails
Lack of a full, clear digital trail can result in compliance checks or penalties. Every transaction must be traceable and logged within your MTD software.
2. Using the Wrong MTD Software
MTD requires specific, HMRC-recognised software to submit returns, yet many businesses still rely on outdated or incompatible tools.
Software not recognised by HMRC
If your platform isn’t on HMRC’s approved list, your submission will fail. It’s essential to use compliant solutions like the Majors App, which is fully MTD-compatible.
Setup errors block authorisation
Many businesses see “not authorised” errors because their software hasn’t been properly linked with their HMRC account. Ensure the setup is correct from the start to avoid submission failures.
Lack of integration with existing systems
Using standalone tools that don’t sync with your current processes increases the risk of manual errors and non-compliance. MTD software should work seamlessly with your accounting system.
3. Missing or Misunderstanding MTD Deadlines
MTD introduces strict deadlines, and the consequences of missing them are becoming more severe.
Confusion about MTD deadlines
Businesses often underestimate how soon VAT return deadlines come around. Failing to submit on time can trigger penalties and interest charges.
New HMRC penalty point system
A new points-based system penalises repeated late submissions. Separate fines apply for late payments and late filings, and these can escalate quickly.
Last-minute filing risks
Submitting returns at the eleventh hour leaves no time to fix errors or technical issues. Planning ahead can save both time and stress.
4. Overlooking Errors in MTD Submissions
Even with the right software, oversight and poor processes can lead to avoidable submission mistakes.
Built-in validation tools go unused
Most MTD platforms include checks that flag inconsistencies before submission. Ignoring them is risky, they exist to catch mistakes before HMRC does.
Submitting without review
Sending your return without previewing it first is a missed opportunity. Always double-check the figures and data for accuracy.
No process for regular system reviews
MTD compliance isn’t “set and forget”. Systems should be audited regularly to ensure everything remains accurate, efficient and compliant.
5. No Contingency for Software or HMRC Outages
Digital systems, while efficient, are not immune to outages and businesses that don’t prepare for downtime can quickly find themselves non-compliant.
HMRC services can be offline
Unexpected maintenance or outages can block last-minute submissions. Submitting early gives you time to adjust if systems go down.
Software or login errors
Failed authorisations, login issues, or server timeouts are common but avoidable if submissions are not left to the last minute.
No fallback plan
Every business should have a plan in place for digital issues. Whether it’s internal escalation processes or calling in your accountant, knowing who to contact can prevent non-compliance.
How to Avoid MTD Issues
Avoiding MTD mistakes is simple with the right processes in place:
- Use MTD-compliant software such as the Majors App
- Set up your software correctly and link it to HMRC’s system
- Keep your tax records digitally in a continuous, fully linked format
- Submit returns well in advance of deadlines
- Train your team to use validation tools and review returns thoroughly
- Monitor HMRC’s service availability and understand how to handle outages
Majors Accounts MTD Compliancy Services
At Majors Accounts, we help businesses of all sizes stay compliant and confident with Making Tax Digital. Whether you need support choosing the right software, setting up digital links, or reviewing your tax submission process, our expert team is here to help.
We offer:
- MTD software setup and support
- Cloud accounting transitions
- Ongoing MTD guidance and troubleshooting
Contact Majors Accounts today to ensure you’re MTD-ready and avoid costly mistakes.