HMRC - new guidance and information
HMRC published public notice 700/22 Making Tax Digital for VAT here on gov.uk.
We anticipate that further supplementary guidance will be published in due course as well as updates to HMRC’s VAT manuals. We will upload links as they become available.
Making Tax Digital for Business - stakeholder communications pack
HMRC has published key information here on gov.uk in respect of Making Tax Digital for VAT and income tax for stakeholders (e.g. advisers, software developers and professional/trade bodies) who are informing/communicating with their clients, customers or members about the changes to digital record keeping and digital submissions.
Software suppliers supporting Making Tax Digital for VAT
HMRC is working with over 150 software suppliers who will have compatible software available for Making Tax Digital for VAT by the launch date on 1 April 2019. HMRC has published the first phase of developers here on gov.uk. This list will be regularly updated as more developers complete their testing with HMRC.
Making Tax Digital webinar – 7 June 2018
We have compiled a list of Q&As from questions that were sent to us before and during the broadcast, and this can be found here.
If you have any further questions please email technical [at] ciot.org.uk.
The CIOT will be running another MTD focussed webinar in the autumn, looking at VAT and income tax. If you would like to send in questions in advance, please send to technical [at] ciot.org.uk. Details of the date and time will be published in early September.
The MTD for VAT pilot launched on 11 April 2018. The pilot builds on the small-scale technical testing HMRC started at the end of 2017. HMRC invited a small number of simple businesses who met the initial eligibility criteria to join the pilot, and access will gradually be widened once the new service has been tested thoroughly and as further functionality is delivered. The “public beta” trial is expected to start in late summer/early autumn; although more complex businesses are unlikely to join the pilot until October 2018, and public bodies until November or December 2018.
HMRC has published its initial list of MTD-compatible software products on gov.uk here. This list will be regularly updated as further developers’ products complete the testing phase. If your developer is not yet on the list, software users should ask their provider about when their product will be updated for MTD or when its testing phase with HMRC will be completed.
MTD for Income Tax Self Assessment trials entered their public beta testing phase on 15 March 2018. You can access the service here. Initially, taxpayers will be eligible for the public beta if they are a sole trader with income from one business and their current accounting period ends after 5 April 2018. The next planned stage is to expand eligibility to taxpayers with income from property.
To take part in the pilot, businesses will need to record their income and expenses in a MTD compliant software package, which lets them send quarterly income tax updates to HMRC. At the end of the accounting period they will need to send a final report to confirm their income and expenses for the year. If they need to claim allowances and reliefs, they can do this within that final report. They will then be able to see a tax calculation for the year in their business tax account as well as through their software. Businesses taking part in the pilot will need to agree to the terms of participation, which can be found here.
Likewise, agents that sign clients up to the pilot (including clients whose digital records are being kept by the agent and clients that keep their own digital records) will need a software package that lets them send the updates to HMRC on their clients’ behalf.
If you and your clients are already using software to keep records, you should check with your supplier when it will be ready to allow you to send MTD updates to HMRC.
The current list of MTD compatible software products is set out on gov.uk here. We understand that there are a number of other products at various stages of development and HMRC have said that they will continue to add to this page as new products become available. A MTD compatible software product includes an API (application programming interface) enabled spreadsheet. There are no API enabled spreadsheets on the market at present although we anticipate that they will be added to HMRC’s list as they become available.
Making Tax Digital: Timetable
On 13 July 2017 the Government announced that it would be delaying the introduction of Making Tax Digital (MTD).
In response to concerns raised by MPs, businesses and professional bodies such as the CIOT, MTD will not be mandatory until April 2019, and then only for VAT purposes.
Under the timetable:
- Only businesses over the VAT threshold (currently £85,000) will have to keep digital records.
- Digital records will only be required initially for VAT purposes, and only from April 2019.
- Business will not have to keep digital records or report quarterly for other taxes (e.g. income tax and corporation tax) until April 2020 at the earliest.
- MTD will be available on a voluntary basis for businesses below the VAT threshold, and for other taxes.
The Government have stated that they will not widen the scope of MTD beyond VAT before the system has been shown to work.
The enabling primary legislation for MTD for businesses for both Income Tax and VAT is in sections 60, 61 and 62 and Schedule 14 Finance (No 2) Act 2017.
The MTD for VAT Regulations SI 2018/261 were laid before Parliament on 28 February 2018 and will come into force on 1 April 2019. No significant changes were made to the Regulations from the draft regulations that were consulted on between 18 December 2017 and 9 February 2018. We understand that some of the detailed comments made by stakeholders, including CIOT, during the consultation exercise might be taken into consideration in the directions and notices, which are expected to be published in May / June 2018.
We have produced a detailed chart which compares the current VAT rules with those expected under MTD for VAT. This can be found here.
HMRC will consult on MTD for Corporation Tax at some point in 2018.
The remainder of the MTD pages should be read with the above in mind.