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MTD: Public Beta Launch

MTD is the most fundamental change to the administration of the tax system for at least 20 years. It is essential that VAT registered businesses use specific software to keep accounting records. Paper accounting records will no longer be sufficient to meet the legal requirement. Your processes will need to be reviewed, and we can assist you with the transition to become MTD-compliant.

Whether you are considering acquiring software or joining the pilot, our expert knowledge are available to provide you with the best advice for smooth transition.

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16 October 2018

Making Tax Digital for VAT Pilot open for business

The HMRC has today launched the “public beta” phase of the Making Tax Digital (MTD) VAT pilot. This marks a significant milestone in the UK tax administration. It will lead to significant change for many business process and administration. The initiative should be considered in the context of the increasing digitalisation of business. More information and guidance can be found on the government website [+Find out more].

MTD and VAT

The first stage of HMRC’s MTD programme focuses on VAT and imposes new requirements for digital record keeping on VAT registered businesses and organisations from April 2019. Such businesses and organisations will be required to:

  • maintain their accounting records digitally in a software product or spreadsheet. Maintaining paper records will cease to meet the legal requirement in the tax legislation.

  • submit their VAT returns to HMRC using a functional comptaible software product that can access HMRC’s Application Program Interfaces (API) platform.

VAT registered businesses will need to acquire a suitable commercial software product or appoint an agent to submit returns to HMRC on their behalf.

Public Beta Pilot

On 16 October 2018, HMRC has opened the pilot to around half a million businesses which meet the initial eligibility criteria who will be mandated to use the service from April 2019.  This means businesses will be able to voluntarily join now in this beta testing phase. They will be able to familiarise themselves with the service and start testing the system early.

The pilot will open first for businesses whose affairs are up to date and straightforward, and extend to other business types over the coming months. The pilot is 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 and have not incurred a default surcharge in the last 24 months. HMRC expects that the pilot will be opened to over 600,000 such businesses by the end of October. However, those who trade with the EU, are based overseas, submit annually, make payments on account, use the VAT Flat Rate Scheme, as well as those newly registered for VAT that have not yet submitted a VAT return, are unable to join at this point.

Penalties

HMRC recognises that businesses will require time to become familiar with the new MTD requirements. During the first year of mandation, HMRC has confirmed that they will not pursue filing or record keeping penalties where businesses are doing their best to comply with the new law. HMRC will continue to take action to safeguard VAT revenue, and sanctions remain possible in cases of deliberate non-compliance.

Deferral

HMRC also confirmed that they have made the decision to defer mandation for 6 months for a small minority of businesses with more complex requirements, to ensure there is sufficient time for testing the service with them in the pilot. Generally, trusts, not for profit organisations that are not set up as a company, VAT divisions, VAT groups and public sector entities are given this 6 months extra testing period. HMRC will be writing directly to all businesses within this group to inform them the extra time before the end of 2018.

How can we help?

MTD is the most fundamental change to the administration of the tax system for at least 20 years. It is essential that VAT registered businesses use specific software to keep accounting records. Paper accounting records will no longer be sufficient to meet the legal requirement.

According to the House of Lords finance bill sub-committee, only 30% of businesses are confident that they understand what is required and less than 15% say that they are prepared. With only six months to go, businesses will need to review their processes quickly. Whether you are considering acquiring software or joining the pilot, our expert knowledge are available to provide you with the best advice for smooth transition to become MTD-compliant.

The above information is intended merely to highlight issues and not to be comprehensive, nor to provide advice. Should you have any questions on issues reported here or on other areas, please contact one of your regular contacts, or alternatively please contact enquiries@mytaxadviser.co.uk.

 
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