Use the menu on the right of the page for information on MTD.
Find the latest news below (hyperlink takes you to article):
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 184.108.40.206 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.
Making Tax Digital for VAT - Latest on the pilot: The pilot is open to all taxpayers, with the exception of overseas businesses.
HMRC announced that the pilot for Making Tax Digital for VAT is open to all VAT registered taxpayers, with the exception of overseas businesses. This includes those mandated to join MTD for VAT on 1 April and 1 October 2019.
Businesses that pay VAT by direct debit will not be able to sign up for the MTD for VAT pilot in the 15 days leading up to the VAT return submission date.
More information on the eligibility criteria and the sign-up link can be found here.
Joining the VAT pilot: agents
Agents can join the VAT pilot for submitting VAT returns for clients that meet the entry criteria set out above. Agents will require an Agent Services Account (ASA). Details about the ASA and a sign-up link are found here.
Further details about the ASA can be found here.
Agents with clients in the pilot must use the change of business details service to tell HMRC about updates to clients’ details. Details can be found here.
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:
- ‘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:
- 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
- Where HMRC are confident that the trader has taxable turnover above the VAT threshold, but the return is not submitted through software
- 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
- 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.