Making Tax Digital for VAT pilot now live for businesses

The pilot is intended to allow up to 500,000 businesses to get fully involved with Making Tax Digital (MTD) for VAT and test it in full ahead of the April 2019 introduction of the system.

MTD for VAT is intended by HMRC to 'make it easier for businesses to manage their tax and will save them, and their agents, time which can instead be devoted to maximising business opportunities, encouraging growth and fostering good financial planning'.

The pilot is now available to sole traders and those who submit the VAT return for a limited company using a standard account period. HMRC notes that once signed up to take part in the pilot, entrants will have to continue to use Making Tax Digital compatible software to submit their VAT returns.

Restrictions on who can use the service currently apply. The pilot is at present not available to trusts or charities, or to those who are part of a VAT group or VAT division, trade with the EU, or are based overseas. Also excluded are partnerships and businesses that are newly registered for VAT and have not previously used an online account to submit a VAT return. Individuals or organisations that submit annual returns, have incurred a default surcharge in the last 24 months, make VAT payments on account, or use the VAT Flat Rate Scheme may not take part. However, HMRC expects that this pilot will be opened to more businesses in the near future.

In order to access the pilot, organisations or individuals will need to put into place software capable of interfacing with the Government Gateway. HMRC has provided a list of compatible software packages which includes Quickbooks, Xero, Sage 50 and PWC spreadsheet. Once software is in place, those wishing to enrol need to provide the Government Gateway user ID and password used to submit their VAT returns online. An existing VAT registration number is also required.

Professional tax agents with clients enrolling in the pilot are required to update their client’s details within 30 days. These include the business name, its place of business, the business’s bank details and its VAT return dates.

Mel Stride MP, financial secretary to the Treasury, greeted the news: 'HMRC is transforming the tax administration so that it is more effective, more efficient and easier for taxpayers. Today’s announcement means that around half a million businesses will be able to join MTD and start filing their VAT returns online making it easier to get their tax right first time.

'More and more businesses use digital tools every day to help them operate - tax should not be different. This is a major step towards bringing VAT into the 21st century.'

Theresa Middleton, director for Making Tax Digital for Business, said: 'Millions of people are already banking, paying bills and interacting with their suppliers and customers online. Using digital tools to help businesses manage their business income and expenses and get their tax right builds on this momentum and will also help them get more control over their finances.'

Brian Palmer, tax policy expert at the Association of Accounting Technicians (AAT), also commented, saying: 'Today HMRC has confirmed that the testing phase for the first implementation of MTD has gone public. 500,000 businesses will be able to join from today, with a further 100,000 able to apply by the end of this month.

'The pilot has been private to a select group of businesses and their accountants since April this year. Now the majority of businesses with a VAT taxable turnover of at least £85,000 will be able to join. As of 31 March 2019, it will be a requirement for these companies to file their VAT returns digitally. Those who trade with European Union state members, charities, and businesses which pay VAT on account are among those businesses who remain excluded from the pilot.

'If your business is in a position to do so - as one in three AAT members told us they were at the end of September - it makes total sense to engage with the pilot as soon as possible. That way, you can get fully involved with the opportunity to test the system in full, and train up all affected employees and clients where needed. In addition, you will be in a position to let HMRC know of any remaining teething problems prior to mandation itself.

'If your business is not ready to join the pilot, I would strongly advise that you start planning immediately to ensure the business can join well ahead of next April. There will be no prizes on offer for waiting. Of the 150 or so providers who have said they will provide MTD-compliant software, over 70 have already had their solutions recognised on HMRC's website. If you think it wise to test the system in full before next April and your provider is ready, there is little point in waiting, you might as enrol to join the pilot straight away.'

The Guidance: Use software to submit your VAT Returns is here

The Guidance: Agents: use software to submit VAT Returns is here

The Guidance: Update your clients’ business details if they are part of the Making Tax Digital for VAT pilot is here

Guidance: Find software suppliers for sending VAT Returns and Income Tax updates is here

Source: Accountancy Daily - Report by James Bunney.

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