If your UK yard is VAT-registered (turnover > £90,000), Making Tax Digital (MTD) has been mandatory since April 2022. By 2026, HMRC’s tolerance for soft-paper-trail compliance has dropped sharply. Here’s what they actually look for during a soft compliance check, and how to avoid the £400-2,500 fines that come with it.
What MTD actually requires
1. Digital records
Every sale and purchase must be in a digital format with digital links all the way through to your VAT return. Excel is technically allowed — but each cell linking to another file/sheet has to be by formula or pivot, never copy-paste.
2. Bridging software, not bookkeeping software
If you use Excel, you also need MTD-recognised bridging software (£20-50/month) that submits to HMRC. Or: an integrated solution that does both.
3. Quarterly returns
Already standard for VAT, but with MTD the format is XML/JSON via API — not the paper VAT100 you may remember.
The 6 things HMRC checks
- Cash sales reconciled daily: lessons paid in cash with no receipt = penalty risk
- Reverse charge handled correctly: importing tack from EU (post-Brexit) needs reverse charge VAT
- Mixed VAT rates: livery (20%), some equine activities zero-rated, riding lessons 20%
- Invoices to companies vs individuals: tax point and VAT mention rules differ
- Pre-paid lesson packs: VAT due on issue, not on use (similar to vouchers)
- Discounts and refunds: must be clearly traceable to original invoice
Common mistakes
”Spreadsheet of the year”
Many yards still use one giant Excel that gets rewritten each year. MTD effectively requires immutable records — that pattern fails.
Manual VAT entry
If your software doesn’t auto-calculate VAT and you type figures manually, errors creep in. HMRC notices.
Mixing personal and business
Owners pay private vet bills through the yard account “for now” and forget. By the next return, untangling is a nightmare.
What good software does
- Auto VAT calculation per line, by service type
- Audit log of every change (who, when, what)
- API submission to HMRC directly
- Reverse charge, pre-paid VAT, refund-trace built in
- Quarterly preview before submission
How Hovera handles this
Hovera supports UK MTD natively: VAT rates configurable per service, full audit trail, HMRC API submission, mixed VAT handling for livery + lessons + tack shop. Your accountant gets read-only access; you submit in 3 clicks.
If you’re still on Excel + bridging, the time saved alone (15-20 hours per quarter) typically pays for the software within 2 quarters.
Book a demo for a UK-specific walkthrough.