Making Tax Digital for VAT: Partnerships and flat rate scheme users join the pilot party

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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.

Making Tax Digital for VAT timeline Jan 2019

 

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.

About Tom Herbert

Tom is editor at AccountingWEB, responsible for all editorial content on the site. If you have a story that might interest us or wish to comment on the site's coverage get in touch via the site's private message function or Twitter DM (@AWebTom)

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09th Jan 2019 11:51

HMRC updated their page re partnerships on 20 December: that's almost 3 weeks ago. I was unaware of this until I read Tom's article.

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09th Jan 2019 11:54

No provision seems to have been made for those on Retail Scheme Apportionment Scheme.
Any idea when they will be permitted to use the beta scheme?

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to nrslater
09th Jan 2019 12:02

I thought retail schemes had been part of the pilot since with went public beta.

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09th Jan 2019 13:29

HMRC wrote in December that “currently we do not have the functionality to support your particular circumstance.” The pilot team was looking at widening the eligibility criteria.

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10th Jan 2019 08:50

It's incredible that this rocket is supposed to take off on 1st April and yet it hasn't been fully tested yet.

The only way this won't end up like the Challenger will be down to the blood, sweat and of all the Accountants and Bookkeepers out there.

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By Tornado
to North East Accountant
10th Jan 2019 13:06

"The only way this won't end up like the Challenger will be down to the blood, sweat and of all the Accountants and Bookkeepers out there."

Not this one. I am not going to shed blood, sweat or tears for any Government, especially if I am unlikely to get paid for it.

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11th Jan 2019 08:44

I see that yesterday the HMRC updated the information on who can join the pilot and make no mention of
- New businesses
- Those who have defaulted in the past
- Trade with the EU

So by assumption that must now can join.

I think everybody who should be joining from 1 April rather than 1 October can join the pilot I believe.

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11th Jan 2019 08:44

I see that yesterday the HMRC updated the information on who can join the pilot and make no mention of
- New businesses
- Those who have defaulted in the past
- Trade with the EU

So by assumption that must now can join.

I think everybody who should be joining from 1 April rather than 1 October can join the pilot I believe.

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to david.bransbury
11th Jan 2019 08:50

Per the HMRC, you will not be able to take part in the pilot at the moment if you:
•are part of a VAT Division
•are based overseas
•are a trust
•are a not for profit organisation that is not set up as a company
•submit annual returns
•make VAT payments on account

Per HMRC those that are mandatory from 1 October is
-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 (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.

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