HMRC has announced the latest update on Making Tax Digital (MTD). Details of MTD here and here
Background
VAT registered businesses with a taxable turnover above the VAT threshold are required to use the MTD service to keep records digitally and use software to submit their VAT returns from 1 April 2019. We emphasise that VAT registered business with an annual turnover below £85,000 are excluded from MTD. This may be the case for voluntary registrations, “intending traders” (businesses which intend to trade in the future but have not done so yet) or small businesses.
The exception to this is a minority of VAT registered businesses with more complex requirements. HMRC have reacted to concerns of certain businesses and, as a result, decided to delay the implementation of MTD for these entities until 1 October 2019.
These entities 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 (eg: Government departments and NHS Trusts)
- Local authorities
- Public corporations,
- Businesses based overseas,
- Business making payments on account
- Annual accounting scheme users
Timeline
Consequently, the full MTD timeline is now:
October 2018
Open to sole traders and companies (except those which are part of a VAT group or VAT Division) provided they are up to date with their VAT. Those who trade with the EU, are based overseas, submit annually, make payments on account, use the VAT Flat Rate Scheme, and those newly registered for VAT that have not previously submitted a VAT return, are unable to join at this point. Those businesses which have incurred a Default Surcharge within the last 24 months will be able to join the pilot by the end of October 2018.
Late 2018
Private testing begins with partnerships, businesses that trade with the EU, and users of the Flat Rate Scheme.
Late 2018 / early 2019
Open to other sole traders and companies who are not up to date with their VAT and businesses newly registered for VAT that have not previously submitted a VAT return.
Early 2019
Open to partnerships and those customers that trade with the EU.
Spring 2019
Pilot open for MTD customers that have been deferred.
April 2019
MTD mandated for all customers (except those that have been deferred).
October 2019
MTD mandated for businesses that have been deferred. The six month deferral applies to customers who fall into one of the following categories: trusts, ‘not for profit’ organisations that are not set up as a company, VAT divisions, VAT groups, those public sector entities required to provide additional information on their VAT return (Government departments, NHS Trusts), Local Authorities, public corporations, traders based overseas, those required to make payments on account and annual accounting scheme users.
This deferral will apply to around 3.5% of mandated businesses.