Making Tax Digital for VAT update

As the planned 1 April 2019 implementation date for making Tax Digital for VAT (MTDfV) gets closer, HMRC has confirmed that mandatory use of MTDfV by businesses with ‘more complex requirements’ will be deferred until 1 October 2019 to ensure there is sufficient time to test software for such businesses.

Those who will not be obliged to use MTD until October 2019 are:

  • Trusts
  • ‘Not for profit’ organisations that are not set up as a company
  • VAT divisions
  • VAT groups
  • Public sector entities required to provide additional information on their VAT return, including Government departments and NHS Trusts
  • Local authorities
  • Public corporations
  • Traders based overseas
  • Those required to make payments on account
  • Annual accounting scheme users.

HMRC has opened its software pilot to businesses with more straightforward VAT affairs (you can sign up via the HMRC website). The pilot will not be opened for certain businesses until:

  • Early 2019 (partnerships and businesses that trade with the EU).
  • Spring 2019 (businesses not required to use MTD until October 2019).

Once a business has signed up to take part in the pilot, it must continue to use MTD to submit its VAT returns. Careful consideration should therefore be given before signing up, as a business which experienced problems would not be able to revert to the previous system for the past few months.

HMRC has also confirmed that:

  • Businesses below the £85,000 UK turnover MTD threshold can continue to use the existing portal.
  • Businesses whose mandatory use has been deferred to October 2019, can continue to file their returns via the existing VAT online portal from 1 April 2019 to 30 September 2019.
  • There will be no universal ‘light touch period’ for the first year of MTD, but it will be lenient with taxpayers who have done their best to comply. Penalties will be issued to those who have deliberately not complied. Surcharges will apply in 2019/2020.

Further information for agents about signing up for the pilot can be found here: https://www.gov.uk/guidance/agents-use-software-to-submit-vat-returns.

Further information for businesses about the pilot can be found here: https://www.gov.uk/guidance/use-software-to-submit-your-vat-returns.

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