Archive notice: This article was published in October 2018 about the MTD for VAT pilot. MTD for VAT has since become mandatory for all VAT-registered businesses. The VAT registration threshold is now £90,000 (from 1 April 2024). For current guidance, see our MTD for VAT page.
Making Tax Digital
As most will know, MTD for VAT is intended by HMRC to make it easier for businesses to manage tax. It is planned to be efficient and easier for taxpayers to get right. Businesses will then be able to focus their attention on business opportunities, encouraging growth and fostering good financial planning.
The pilot
The pilot will allow up to 500,000 businesses to become familiar with Making Tax Digital (MTD) and to get fully involved in the new initiative. The businesses will be able to test out MTD in full ahead of the April 2019 general introduction of the new system.
Who can get involved in the pilot?
The pilot is now live for sole traders and those who submit VAT returns for a limited company. Entrants must used MTD compatible software to submit their VAT returns.
At the moment, the pilot is not open for the following:
- Trusts or charities
- Those who are part of VAT group or VAT division
- Those who trade with the EU or are based overseas
- Partnerships or businesses that are newly VAT registered and have not previously used an online account to submit a VAT return
- Individuals or organisations that submit annual returns
- Those that have occurred a default surcharge in the last 24 months
- Those who make VAT payments on account
- Those who use the VAT Flat Rate Scheme
HMRC does anticipate that the pilot will be opened to more businesses in the coming months.
How is the pilot accessed?
Organisations will need to ensure that they have software capable of interfacing with the Goverment Gateway. HMRC has provided a list of suitable software packages. Included in this list is Xero (see why we recommened Xero), Quickbooks, Sage 50 and others. Once this software is ready, the users must provide their Government Gateway user ID and password to submit VAT returns online. A pre-existing VAT registration number is also needed to do this.
If you are a tax agent wishing to enrol clients in the pilot, you must update their details within 30 days. These details include:
- Business name
- Place of business
- Business’ bank details
- VAT return dates
Why should I become involved in the pilot?
Brian Palmer, the tax policy expert at the Association of Accounting Technicians (AAT) says this:
‘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.’
However, if as a business you feel that you are not yet ready to join the pilot, now is the time to start planning so you can be ready well in advance of the deadline. The sooner businesses are used to the new way of doing things, the easier the transition to MTD will be.
We’re happy to advise on the above, please feel free to call us on 0161 832 4451 or drop us a line mail@jackross.co.uk.
