Making Tax Digital - the deadline is approaching

Time is getting short now for preparation for Making Tax Digital (MTD) in April this year

Below is an extract of an email sent to us today by our Institute, which we are sharing with you

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On 10 January 2019 HMRC opened up the Making Tax Digital (MTD) for VAT pilot to all businesses that will be mandated from April 2019 (ie, the first VAT accounting period starting on or after 1 April 2019).

 

Shortly before Christmas 2018 the pilot was opened to partnerships and Flat Rate Scheme users and the following groups are now also able to join:

 

  • EU traders
  • Monthly filers
  • Businesses that use non-standard VAT accounting periods
  • Businesses that are not up to date with their VAT returns
  • Businesses that are newly registered for VAT and have not previously used their VAT online account to submit their VAT Return
  • Group registrations: groups can now join the MTD for VAT pilot although the mandatory start date for group registrations is 1 October 2019.

 

HMRC  revealed that, as at 10 January 2019, more than 3,500 businesses had joined the pilot. The number of businesses that will be required to join from April 2019 is approximately 1.1m.

 

Information on how to sign up to MTD for VAT is available on the government link https://www.gov.uk/guidance/use-software-to-submit-your-vat-returns.

It is worth noting that each business has a very specific window in which it can sign up to MTD for VAT. Businesses (or their agent on their behalf) need to sign up:

 - Only after they have filed all their non-MTD VAT returns (which may not be until 7 August, 7 September or 7 October 2019 for quarterly filers).

- Only when they have acquired an MTD compatible software product

- If they pay by direct debit, not within the 15 working days before the submission date and the five working days immediately after it.

This can give quite a short timeframe, particularly for businesses that file monthly returns.

 

The Insutute's Tax Faculty has received reports of unexpected rejections of applications to sign up for the pilot. This is expected to improve following the relaxation of the eligibility criteria.

Any business or agent that encounters a problem during the sign up process is advised to use the ‘Get help with this page’ link on the relevant screen.

This will raise a ticket with HMRC’s helpdesk who will get in touch to resolve the issue (ie, it is a way to get specific help rather than just a way of raising a general issue with a gov.uk page).

 

HMRC is writing to all businesses mandated from April and expects that all letters will have been received by early February. These letters are to raise awareness and do not have legal standing; HMRC is not able to identify with absolute accuracy which businesses are within scope for MTD for VAT and the onus is on the business (or their agent) to self assess whether they are required to comply.

 

If you click on this link you will see if your software company is compliant with MTD rules - if not, you need to make arrangements urgently - so please call us

https://www.gov.uk/guidance/software-for-sending-income-tax-updates

 

Some registrations have been deferred until after October 2019 - see below

On 16 October 2018 the government announced that the start date for Making Tax Digital (MTD) for VAT is deferred by six months for a small group of complex businesses.

The deferral, to the first VAT accounting period starting on or after 1 October 2019, applies to the following:

  • trusts
  • ‘not for profit’ organisations that are not companies (this includes some charities)
  • VAT divisions
  • VAT groups (the deferral applies to the group registration only and not to any group companies that are not covered by the group registration)
  • public sector entities that are required to provide additional information alongside their VAT return (such as Government departments and NHS Trusts)
  • local authorities and public corporations
  • traders based overseas
  • those required to make payments on account
  • annual accounting scheme users.

With the exception of VAT groups, who can now sign up to MTD for VAT, businesses that fall into the categories listed above cannot currently join the MTD for VAT pilot.

Although HMRC has written to each deferred business, there has been a delay to approximately 5,000 letters that are due to be issued by the Non-established Taxable Persons unit in Aberdeen.

Unlike the MTD awareness letters, the letters to deferred businesses do have legal standing. Any business that wishes to rely on the deferral must ensure that it receives (and retains) the letter notifying them that their start date has been deferred. HMRC has confirmed that if a business receives a deferral letter in error they can rely on having done so and need not comply with MTD for VAT until their first VAT accounting period starting on or after 1 October 2019.

If a business understands that it is in one of the deferred categories but has not received a letter, it should contact the VAT helpline to request a letter.

HMRC has also indicated that the soft landing for digital links will apply for the first 12 months of mandation ie, for deferred businesses the digital links requirement will apply to VAT accounting periods starting on or after 1 October 2020 and the MTD for VAT notice will be amended accordingly.