Making Tax Digital for VAT – Don’t join until you read this!

Making Tax Digital – Growing confidence

It’s official! If you are a Sole trader or a company with up-to-date VAT affairs, you are now able to join HMRC’s test phase for VAT Making Tax Digital (MTD). While testing of VAT-MTD started last April, until now, it has been on a limited, controlled, invitation-only basis. In what can be taken as a clear indication of the department’s confidence, the VAT MTD pilot has now been opened to accept everyone.

New Guidance

In support of the public test phase, you can now consult a suite of new and updated guidance, available to help you, VAT-registered businesses and their agents, get to grips with the new requirements. The newly published guidance covers:

Use of software to submit VAT returns. A guide outlining how to sign up a business for the MTD-VAT pilot and how to join.
For agents: use of software to submit VAT returns. A guide outlining how an agent and their clients can sign up for the MTD-VAT pilot.
Find software suppliers for sending VAT returns and Income Tax update This lists third-party HMRC-recognised software packages that support the Income Tax and VAT-MTD pilots

HMRC has also published a series of videos on its Help and Support page:

Can everyone join?

As of last month, provided you haven’t incurred a default surcharge in the last two years, you and just over 40% of the approximate 1.1 million VAT-registered entities, who are required to keep digital records and file MTD-compliant VAT returns from April next year, will be able to apply to onboard early. A further 100,000 will be able to join the public pilot by the end of this month.

What if you can’t join?

There’s a small but significant list of VAT registered entities who, as of yet, remain unable to join the pilot. You can’t join if:

Trade with the EU
Are based overseas
Submit VAT returns annually
Make payments on accounts
Use the flat rate scheme
Are newly registered and have not yet filed a return
Are members of VAT groups or VAT divisions
Have received a Default Surcharge notice in the last 24 months. However, they will be allowed in by the end of this month.
Are unincorporated not-for profit organisations
Are trusts
Are Local Authorities who complete VAT form 21
Are Public Corporations

Timetable

To help you plan, HMRC has published a timetable indicating when each of the embargoed cohorts will be able to join the pilot.

3.5% to get a deferral

HMRC has reported that 3.5% of those mandated will not be able to onboard before the end of December. This cohort will have their mandation date pushed back to October 2019. You are affected if you are / have:

VAT groups or VAT divisions
Overseas traders registered for VAT
Trusts
Local Authorities
Public Corporations

If you are in the deferral group, HMRC will contact you in writing.

What is Making Tax Digital?

Making Tax Digital is a key part of the government’s plans to make it easier for you, individuals and businesses, to get your tax right and to keep on top of your affairs. This will ultimately result, for you and millions of people, in the end of the annual tax return. As the first stage of a wider roll-out process, if you are a VAT-registered business with VAT-able turnover above the compulsory £85,000, your registration threshold will be mandated to join the VAT Making Tax Digital for Business regime. To meet your VAT return obligations, this will apply to all return periods commencing April 2019. As a minimum, you will be required to maintain your VAT records digitally and to file MTD-compliant VAT returns, using third party software. If you are mandated to join, you will no longer be able to log on to HMRC’s portal to complete and file your online return. If your business is voluntarily registered for VAT, with a VAT-able turnover under £85,000, you will not be required to use the system, although you can choose to do so voluntarily.