Making Tax Digital

Use the menu on the right of the page for information on MTD.

Find the latest news below (hyperlink takes you to article):

 

Agent Services Account (ASA) and Services for Agents

In order to access the new MTD services and to supply updates on behalf of clients, agents will need a new Agent Services Account (ASA).  This is in effect a new Government Gateway to access the new service.  Each agency will have just one account per firm, and will be able to set up staff with administrator or assistant access to the account.  Many firms may already have created an ASA in order to submit Trust Registration Service returns.  

A basic outline of the ASA and how to set one up can be found here.  Further information on the ASA can also be found in the HMRC guidance Making Tax Digital for VAT as an agent: step by step.

HMRC have also released:

When you first set up your ASA account you will be given a new set of credentials.  It is very important that you keep these safe, as HMRC have said they are unable to advise agents of the credentials they were given on set up.  Instead, if an agent loses their ASA credentials they will have to contact the VAT helpline, who will delete their ASA account.  They will then be required to set up a new ASA account from scratch. 

On 10 July 2019 HMRC informed us that the following improvements have been made to the ASA:

  • You are now able to track the status of authorisation requests made in the last 30 days – this is where an agent has used the new digital authorisation route from ASA to authorise a new client.
  • In response to user feedback the ‘link your clients’ step has been renamed to ‘copy your clients’.  HMRC have provided a revised ASA step by step guide that reflects this change.
  • HMRC have delivered new functionality that shows agents the number of client authorisations that they have copied over from HMRC online services.

 

HMRC’s most common MTD customer support queries

This document summarises the most common of HMRC’s customer support issues for MTD and the associated HMRC guidance, including:

  • Sign-up
  • Accessing software
  • Viewing data in the account
  • Does MTD impact other services? eg ECSL, deregistration
     

HMRC glitch for some overseas businesses joining MTD

Overseas business are included in the group of taxpayers in the deferred mandation for MTD, meaning that they must commence with keeping digital records from the first VAT period starting on 1 October 2019 or later. Overseas businesses should have received a letter confirming the deferral period and should contact the VAT helpline if this has not been received. However, overseas businesses are able to voluntarily sign up to MTD earlier than the deferral period should they choose.   

HMRC have informed us that they are experiencing an issue affecting some overseas customers who have either not registered for VAT properly, or where HMRC do not hold the correct information on their system. For example, if the address held is the address of the UK based tax agent, this means that HMRC’s system will not recognise it as an overseas business for the purposes of MTD, therefore when the overseas business tries to sign up, the digital service will assume it is UK based and ask for a company registration number to check with Companies House, which cannot be provided.

HMRC are currently looking at the best way to address this issue and the affected customers, and will have something in place before 1 October when the deferral ends. This may also be why some overseas businesses have not received the expected deferral letters, in which case they should contact the VAT helpline.

 

Availability of the online VAT Certificate

Members have reported that once a business has signed up to MTD they no longer have access to view the online VAT certificate.

HMRC have informed us that the vast majority of taxpayers signed up (or signed up by an agent) to MTD are now able to view their VAT certificate in their Business Tax Account (HMRC online services).

The functionality for agents to access this information will be delivered in August. In the meantime they can call the VAT helpline or contact their client to request the information.

The functionality for a small number of taxpayers with non-standard accounting periods will be delivered later this year with a confirmed date to follow.

 

MTD - further deferral for GIANT users

On 17 June 2019 HMRC announced that for those businesses who use the GIANT service (Government Information and NHS Trust), the deferral period will be further extended. HMRC has not announced the new mandation date as yet but will write to affected taxpayers to inform them of the additional deferral period, then will write again later in the summer with further information about the revised timetable and with a formal extension. Affected taxpayers should continue to submit their VAT returns as they do now.

This further deferral is due to a potential reform to VAT refund rules for central government, with the aim of reducing administrative burdens and improving public sector productivity. The review is still underway, and HMRC will need to consider the outcome in the context of MTD for GIANT customers.

Taxpayers that do not use the GIANT service are not affected by this update; those in the current deferral group continue to be mandated for MTD for the first VAT period starting from 1 October 2019 or later.

 

Making Tax Digital (MTD) scheduled maintenance

HMRC will shortly be undertaking scheduled maintenance to the Making Tax Digital (MTD) service for VAT.

Taxpayers will be unable to use the MTD VAT service from 4pm on Saturday 17th August to 4pm on Monday 19th August. During this period, customers will be unable to:

  • Sign up for MTD
  • Sign clients up for MTD
  • Submit returns
  • View previous submissions and payment details
  • Set up new or cancel and amend existing direct debits
  • Review and update any business or client details

The payments service will not be available during the downtime but will be open on Monday 19th August.

Agents will be able to access the Agent Services Account but will not be able to sign up clients, submit returns and view and amend client details.

 

New guidance in the MTD for VAT Notice 700/22

The VAT notice for MTD has been updated today, which includes new information/rules on:

  • use of supplier statements – can be used instead of individual invoices if bearing the correct information
  • petty cash transactions – for individual purchases with a VAT-inclusive value below £50, these can be batched and the entry may not exceed a VAT-inclusive value of £500 per entry
  • charity fundraising events – single entry for sales and single entry for costs

The guidance on the turnover test, following the rules when you're exempt, digital links, and supplies made by third party agents and supplies received has also been updated.

Further explanation of these relaxations can be found on taxadvisermagazine.com

 

MTD for Welsh language speakers

MTD-compatible software is developed by third party vendors and currently there are no Welsh language options commercially available. We understand that HMRC has actively encouraged software vendors who are developing MTD software to produce Welsh language services, but so far none of the vendors who were approached have developed this offering because of the lack of customer demand. HMRC have stated that they will continue to encourage software vendors to produce this offering.

Taxpayers are able to apply for an exemption from MTD if they feel the lack of Welsh software means they cannot join MTD and HMRC will consider the application. Taxpayers or their agents can apply for an exemption by calling the general VAT enquiries line on 0300 200 3700 (0300 200 1900 is the Welsh language helpline), or writing to HM Revenue and Customs - VAT Written Enquiries Team, Portcullis House, 21 India Street, Glasgow G2 4PZ. HMRC’s guidance on MTD exemptions is available online here.

 

Enrolling into Making Tax Digital for VAT – timetable

When enrolling yourself or clients into MTD for VAT it is vital that you get the timing right. Once signed up, HMRC will expect all future VAT returns to be filed through MTD software – including those for current / previous periods which have not yet been submitted. Further, there are additional restrictions on the sign up periods, particularly for businesses who pay by Direct Debit. 

We have prepared an illustration to show the sign up periods for businesses on staggers 1, 2 and 3, as well as those on monthly returns. If a business signs up at the wrong time, a number of problems can arise, and using this guide should help ensure that such problems are avoided.

 

Making Tax Digital CIOT & ATT webinars: 21 February 2019

The CIOT and ATT held a webinar focussing on MTD for VAT on the morning of 21 February 2019.  The recording and corresponding slides can be found here.

If you have any further questions please email technical [at] ciot.org.uk

 

Making Tax Digital – Soft landing period confirmed as 12 months for taxpayers subject to deferred mandation

HMRC has updated VAT Notice 700/22 Making Tax Digital for VAT. It now includes confirmation at section 3.2.1.1 that for taxpayers subject to delayed mandation from 1 October 2019, the digital links ‘soft landing period’ will also be 12 months, i.e. the taxpayer has until its first VAT return period starting on or after 1 October 2020 to put digital links in place.

 

 

MTD pilot for Income Tax Self-Assessment

MTD for Income Tax Self-Assessment trials entered their public beta testing phase on 15 March 2018. You can access the service here. Taxpayers are 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, and taxpayers who rent out UK property (excluding furnished holiday lettings). 

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.

 

Making Tax Digital – HMRC letter to deferred businesses

HMRC announced that a number of businesses who would otherwise need to comply with the requirements of Making Tax Digital from 1 April 2019 would be deferred until 1 October 2019. 

More information regarding which businesses are deferred can be found below.

HMRC undertook a detailed exercise to identify all customers that fall within this group, and issued letters to every customer affected. A copy of the letter sent to these businesses is below for information.

The letter is a specific:

  • direction under Regulation 25A SI 1995/2518 to continue using existing methods to file VAT returns for all periods starting before 1 October 2019 (unless businesses choose to join Making Tax Digital for VAT before then)
  • notification of exemption under Regulation 32B SI 2018/261 from the requirement to keep an electronic account (digital VAT records)

Any business that has a taxable turnover of, or above, the UK registration VAT threshold (currently £85,000) and does not receive the letter below (and who does not otherwise qualify for exemption) must comply with MTD from 1 April 2019. If you think that you or your client should qualify for the deferral, but have not received one of these letters, you should contact HMRC on the VAT Helpline - 0300 200 3700.

 

Overview of Making Tax Digital for VAT – deferral period and timeline for pilot and mandation

HMRC announced in its policy paper that there is a deferral period of 6 months for Making Tax Digital for VAT for businesses falling into one of the following categories:

  • trusts,
  • ‘not for profit’ organisations that are not set up as a company,
  • VAT divisions,
  • VAT groups,
  • those public sector entities required to provide additional information on their VAT return (Government departments, NHS Trusts),
  • local authorities,
  • public corporations,
  • traders based overseas,
  • those required to make payments on account, and
  • annual accounting scheme users.

These business will only be required to adhere to the MTD for VAT rules from 1 October 2019.

Details in respect of the deferral and the timeline can be found here.

HMRC have also produced a visual timeline of the key dates for entering the pilot and the dates that MTD for VAT goes live.

 

MTD Communications – HMRC letters to businesses affected by MTD for VAT

HMRC started to send out their first wave of what they are calling 'encouragement letters' to businesses within the scope of MTD for VAT in November 2018, and the process is ongoing. The letters are not copied to the businesses’ agents.

Four versions of the letter are now being used:

  1. Where HMRC are confident that the trader has taxable turnover above the VAT threshold, and HMRC know the software through which the returns are submitted
  2. Where HMRC are confident that the trader has taxable turnover above the VAT threshold, but the return is not submitted through software
  3. Where HMRC believe that the trader might have taxable turnover above the VAT threshold, and HMRC know the software through which the returns are submitted
  4. Where HMRC believe that the trader might have taxable turnover above the VAT threshold, but the return is not submitted through software

Example copies of each letter are attached.

HMRC remain committed to writing to everyone within the scope of MTD for VAT, which we understand is to be done by the end of February.

 

Making Tax Digital: History and timeline

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. In October 2018, HMRC announced that certain businesses with more complex VAT matters would have mandation deferred for six months (details are set out further up the page). This is expected to apply to approximately 3.5% of the mandated business population.

Under the timetable:

  • Only businesses over the VAT threshold (currently £85,000 of taxable supplies) will have to keep digital records.
  • Digital records will only be required initially for VAT purposes, and only from April 2019 (unless the deferral period applies).
  • 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 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 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 the future.

The remainder of the MTD pages should be read with the above in mind.

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