Making Tax Digital - Latest Update
This blog was originally published on LinkedIn on 17 October 2018.
There were some interesting developments in yesterday’s update from HMRC regarding Making Tax Digital (MTD) for VAT.
1. HMRC has decided to defer the mandation date by 6 months for certain types of VAT registration entities.
This 6 month deferment applies to the following VAT registration categories: trusts; ‘not for profit’ organisations that are not incorporated; VAT divisions; VAT groups; public sector entities required to provide additional VAT return information (Government departments, NHS Trusts); local authorities; public corporations; traders based overseas; those on payments on account; and, annual accounting scheme users.
The revised mandation date for these organisations is 1 October 2019 and this effectively provides 1 year from now to be ready for MTD for VAT, however, it is still advised to start preparing for this sooner rather than later. HMRC expect that deferral will apply to around 3.5% of those VAT registrations mandated under MTD.
2. HMRC’s pilot service is now open to sole traders and companies whose VAT affairs are up to date and are ‘straightforward’.
However, the pilot service is not yet open to businesses that: are partnerships; trade with the EU; are based overseas; submit annual returns; make payments on account, use the VAT Flat Rate Scheme; and, those newly registered for VAT that have not yet submitted a VAT return. It is expected that businesses with a default surcharge within the last 24 months will be able to join the pilot by the end of this month.
There will be many businesses that don’t view themselves as having ‘straightforward’ VAT affairs that should in fact still be able to join HMRC’s pilot, in order to help them prepare for the MTD go live date. This could include limited companies that are required to carry out partial exemption calculations.
HMRC have updated their Overview of MTD webpage and this includes a revised timeline showing the mandation and pilot joining dates. This can be found at the following link: https://www.gov.uk/government/publications/making-tax-digital/overview-of-making-tax-digital
Although deferment will likely be welcomed by those affected, it is looking ever more likely that MTD for VAT is not going away. And for the vast majority of VAT registered businesses that don’t fall within the October 2019 deferment, it is strongly recommended that they still get ready for their April 2019 mandation date.
French Duncan are assisting clients with their MTD preparation and offer a range of services around this, such as outsourced bookkeeping & VAT return preparation/submission, systems reviews/healthchecks and general advice around MTD and how it impacts on the business operation.