NHS trusts and government departments have been granted a further deferral of the start date for MTD for VAT, beyond 1 October 2019.
Businesses and entities required to be VAT registered as they have VATable income exceeding the VAT registration threshold must sign-up for Making Tax Digital (MTD) to submit VAT returns using MTD-compatible software for periods beginning on or after 1 April 2019, unless they have been given a deferred start date.
In October 2018, when the MTD for VAT pilot moved into public beta stage, HMRC announced that “complex businesses” would have a deferred start date for MTD for VAT. All of those deferred businesses should now have received a letter from HMRC inviting them to join MTD and reiterating that the MTD service must be used for VAT return periods beginning on or after 1 October 2019.
The list of deferred businesses includes all public sector entities which are required to submit additional information alongside their VAT return, such as NHS trusts and government departments. Those entities use a special online system to submit that additional information known as the GIANT service (Government Information and NHS Trust).
On 17 June 2019, HMRC made it known to the professional tax and accountancy bodies that the entities that use GIANT would not be able to start using MTD for VAT from 1 October 2019, and instead they would be given a further deferral to a date which has not been announced.
The affected entities should receive a letter from HMRC this week, informing them of this extra time to prepare for MTD. A further letter will be sent later this summer to give a revised timetable for the mandation into MTD for VAT.
This is not an optional deferral; it is necessary for all GIANT users. In the meantime, those GIANT users will have to submit VAT returns as they do now.
The official reason given is that a further deferral is needed due to a potential reform of the VAT refund rules for central government. A policy paper on this topic was supposed to be released “in the coming months” following the Spring Statement on 13 March 2019, but it hasn’t appeared.
The advertised aim of this yet unseen policy paper, provisionally titled: VAT Simplification and the Public Sector, is to “reduce administrative burdens and improve public sector productivity.”
The HMRC Agent Update issue 72 reports that over 180,000 VAT returns have already been submitted using MTD compatible software, and over 325,000 businesses have signed up for MTD.
However, there have been bottlenecks with long delays in getting through to the HMRC helplines as a large number of taxpayers and advisers look for help with numerous problems. HMRC says it is working to improve the performance of its helplines and its support model in general.
The CIOT and ICEAW Tax Faculty are also working with HMRC to identify and share causes of MTD difficulties. Keep an eye out for announcements of workarounds on the CIOT dedicated MTD news page and the Tax Faculty MTD hub. Also, don’t forget to check our MTD pages for tips from community and software experts.