Partnerships and those on the flat rate scheme for small businesses can now sign up to join the Making Tax Digital for VAT pilot. HMRC has also written to the small number of businesses with complex needs that will have to delay starting to file under MTD until October.
In an update published in the run-up to Christmas, HMRC has announced the extension of the Making Tax Digital for VAT pilot scheme to partnerships and users of the VAT flat rate scheme.
The move means that sole traders, partnerships or those that currently submit the VAT Return for a limited company are now in scope for the pilot, provided they use a standard accounting period and are up to date with VAT payments.
According to the tax authority’s guidance, once a taxpayer has signed up to take part in the pilot they will have to continue to use Making Tax Digital compatible software to submit VAT Returns.
Businesses still not able to take part in the pilot at the moment are those that:
- currently trade with, or have traded with the EU
- are part of a VAT group or VAT Division
- are based overseas
- are a trust
- are a not for profit organisation that is not set up as a company
- submit monthly or annual VAT returns
- make VAT payments on account
- are a business that is newly registered for VAT and have not previously used the VAT online account to submit a VAT Return
In the run-up to Making Tax Digital for VAT’s current go-live date of April 1 the pilot will be opened to more businesses, and HMRC advises businesses, taxpayers and agents to check regularly on their MTD pages.
Letters to businesses with complex requirements
HMRC has also begun to write to businesses affected by the deferment announced for ‘complex businesses’ back in October 2018.
Around 3.5% of VAT-registered entities will brought into the MTD for VAT regime for periods beginning on and after 1 October 2019 (instead of for VAT periods beginning from 1 April 2019) due to HMRC’s systems being unable to cope with their particular circumstances.
Complex organisations included in the deferment include: trusts, not-for-profit organisations that are not companies (including some charities), VAT divisions, VAT groups, those public sector entities required to provide additional information alongside their VAT return (such as government departments and NHS Trusts), local authorities, public corporations, traders based overseas, those required to make payments on account and annual accounting scheme users.
The tax authority has conducted an exercise to identify all organisations that fit these criteria, and has now started the process of contacting them.
The letter, a copy of which has been seen by the CIOT, outlines the government’s digital VAT plans and then tells the taxpayer or organisation that they are “part of a small number of customers who do not have to start using Making Tax Digital from 1 April 2019.
The recipient is advised that they will need to start using the MTD service “for your first VAT return for the period starting on or after 1 October 2019”.
However, the correspondence is less clear in regards to when affected organisations will have the chance to sign up for the pilot scheme.
“We estimate that our pilot for most VAT customers like you will start in early 2019,” reads the letter. “We will write to you with details of how to join.”
HMRC has also produced a visual timeline of the key dates for entering the pilot and the dates that MTD for VAT goes live which can be found here or below.
Looking to fine-tune your MTD preparations? Join Rebecca Benneyworth and John Stokdyk for a morning workshop in London on 12 February. Book your ticket here.