MTD for VAT shifts to public pilot

big ben london
istock_amartphotography_aw
Share this content

The government’s flagship digital tax programme has moved up a notch with the extension of the pilot scheme to around half a million businesses.

In a statement released today, HMRC announced that the pilot is now open to sole traders and companies, provided they are up to date with their VAT and have not incurred a default surcharge in the last 24 months.

Those who trade with the EU, are based overseas, submit annually, make payments on account, use the VAT Flat Rate Scheme, and those newly registered for VAT that have not previously submitted a VAT return are currently unable to join. But they will be allowed access in the coming months.

Six-month deferral for complex businesses

The tax authority also announced a six-month MTD deferral for a number of organisations with more complex requirements to give them “sufficient time for testing the service” before they are mandated to join.

Around 3.5% of VAT-registered entities will now be mandated into MTD from 1 October 2019 instead of for VAT periods beginning from 1 April 2019. These complex organisations 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.

Any business not in one of these groups and over the VAT reporting threshold (£85,000) will be mandated to keep their VAT records digitally and file their returns using MTD-compatible software from April 2019 as previously announced. HMRC stated it will gradually expand the service to cover all types of VAT registered businesses.

A private version of the pilot has been in operation since April on a small scale, with around 250 invited businesses and agents taking part.

New and updated guidance

To support the public beta phase HMRC has released new and updated guidance to help VAT-registered businesses and their agents with the new requirements. This covers:

'No prizes on offer for waiting'

Commenting on the news AAT tax policy expert Brian Palmer urged businesses and accountants to engage with the pilot as soon as possible.

“You can get fully involved with the opportunity to test the system in full, and train up all affected employees and clients where needed,” said Palmer. “In addition, you’ll be in a position to let HMRC know of any remaining teething problems prior to mandation itself.

“If your business isn’t ready to join the pilot, I’d strongly advise that you start planning immediately to ensure the business can join well ahead of next April.  There’ll be no prizes on offer for waiting. Of the 150 or so providers who have said they will provide MTD-compliant software, over 70 have already had their solutions recognised on HMRC's website. If you think it wise to test the system in full before next April and your provider is ready, there’s little point in waiting, you might as enrol to join the pilot straight away.”

AccountingWEB is hosting a live, interactive webcast examining the mechanics and regulations of MTD, plus a look at the pilot and solutions, including bridging software. The session will be broadcast on Thursday 18 October at 11am, then available to watch on-demand. For more information or to sign up, click here.

About Tom Herbert

Tom is editor at AccountingWEB, responsible for all editorial content on the site. If you have any comments or suggestions for us get in touch.

Replies

Please login or register to join the discussion.

avatar
By Matrix
16th Oct 2018 17:12

How is HMRC going to communicate this to businesses or are they assuming that businesses read HMRC statements?

Thanks (4)
avatar
to Matrix
16th Oct 2018 17:25

The HMRC are meant to be writing to all VAT registered businesses. I was told in July that the HMRC was hoping to do this in September but this was not confirmed. However I heard in September on the agenda for the HMRC board for this month was the final rubber stamping of MTD for VAT. Due to today's announcement I assume that has happened so hopefully the letters will be sent.

Thanks (1)
avatar
to david.bransbury
16th Oct 2018 19:17

I have not had my letter yet. I will report back when it arrives. I wonder what it will say (as every bridging software website I have looked at does not have downloads yet so I cannot see what I am supposed to do - I am not even going to spend any time emailing any providers yet until they have sometihng I can use which is bridging and is not cloud based nor am I going to train myself in excel until I have to)

Thanks (2)
to Matrix
17th Oct 2018 16:29

Very badly, if this reaction from a confused business owner is typical...

https://www.ukbusinessforums.co.uk/threads/vat-returns-to-be-submitted-d...

Thanks (0)
avatar
17th Oct 2018 21:36

Good link. I feel like those people on that link.

What would really help me now, this week, is if HMRC could tell me one provider with free bridging software I can download tomorrow and start learning how to use.

I have not seen free software I can download immediately anywhere, just companies wanting to take my personal data and register me as interested, not something I wnt to do.

Thanks (1)
avatar
16th Oct 2018 17:14

It si a bit rich fo HMRC to say sign up now when as far as I know none of hte free providers have softwae you can download yet as HMRC has not specified yet. no one wants to commit to software that is not approved and ready surely particularly th ose of us using paper records and may have to learn to use excel and who do not and will not use the cloud.

The Lords sub committee on the finance bill has just taken evidence from the FSB which seems to indicate HMRC have not been perhaps as helpful as they might to small businesses on this.

Thanks (2)
16th Oct 2018 17:36

So I can pilot 2 VAT returns then?

once I have paid for some extra software.

Whoop.

Thanks (1)
avatar
to ireallyshouldknowthisbut
16th Oct 2018 19:18

They make it look so unattractive and say once you are in you are in - you cannot try and then stop it so who would want to be a guinea pig when there is hardly time to eat some days due to pressure of work?

Thanks (2)
avatar
16th Oct 2018 18:53

"Those who trade with the EU, are based overseas, submit annually, make payments on account, use the VAT Flat Rate Scheme, and those newly registered for VAT that have not previously submitted a VAT return are currently unable to join. But they will be allowed access in the coming months."

WTF is that HMRC! With less than 6 months to go before go live date, we still have a list of exclusions as long as your arm. How can they be allowed to get away with this drivel?

Thanks (5)
avatar
to mr. mischief
16th Oct 2018 19:20

Exactly anhd gosh loads of us will trade with the part of the EU which is not UK. I have clients who sometimes are abroad eg NL, Austria etc. I cannot be that unusual as a tiny one person VAT business that I have clients outside the UK. Not that I want to go anywhere near this nor buy or try any software until the last possible minute anyway...... sa it's going to be hard, take 10 - 20 hours of my time at least and will probably not work.

Thanks (0)
avatar
By Matrix
to mr. mischief
16th Oct 2018 23:48

So these businesses are excluded from the pilot but are still mandated to start in April (some in Oct).

Trade with the EU? You buy one item from Amazon Lux or have an Irish service provider and you trade with the EU so surely this is a huge number of businesses? Loads of my clients have reverse charge on various apps/add ons etc.

Thanks (2)
avatar
to Matrix
18th Oct 2018 11:16

Or Office 365! We got a letter from HMRC re 'what would happen if we get a no-deal' because they saw that we purchase goods from the EU. We're an accountancy firm! The only thing that I can conceive from memory is that we purchased Office 365 directly from Microsoft for a year. Meanwhile, clients who actually trade with the EU didn't get the letter. Brexit and MTD are both a shambles and a car crash waiting to happen. I had a lovely three week holiday in a non-EU country recently. It was bliss to hear nothing about either subject for three whole weeks!!

Thanks (0)
avatar
16th Oct 2018 20:22

Per a tweet by Rebecca Benneyworth yesterday.

There is absolutely no doubt that #MTD will start on 1 April 2019. All businesses over VAT limit (and VAT registered) need digital records (which could be a spreadsheet) ASAP. Stop waiting for it to be cancelled and get with it now!

Thanks (1)
avatar
By Matrix
to david.bransbury
17th Oct 2018 19:51

Her tweets are very pro MTD which is at odds with the rest of us. However I can only see pain and unpaid work and clients blaming advisors, whereas she has seminars lined up until she retires on this topic.

Thanks (1)
avatar
16th Oct 2018 20:23

!

Thanks (0)
avatar
By tedbuck
17th Oct 2018 10:07

Rumour has it that people in business will have to keep records.
Oh Yes.... digital records.
This could be something of a burden for some of the people we deal with on the margins of society - still I don't suppose it matters at this stage as they won't be over the VAT threshold and I expect that with MTD they will ensure that they stay beneath the threshold even if it means having to put a few quid in their trouser pockets or taking a day off to play golf.
I am just not sure what HMRC thinks they are going to achieve with this - lots of redundancies in HMRC, I expect, so the quality of 'customer' (their expression not mine) service will reduce even further but it will stop us writing to them as computers don't take any notice do they?
Since the only way to get a response from HMRC these days is to lodge a complaint I hope that all the redundant staff end up in the complaints office.
What fun!

Thanks (0)
avatar
to tedbuck
17th Oct 2018 10:26

The way this is going is that I expect in 5 years time we are submitting a full nominal ledger on all businesses (including landlords) at least quarterly and possibly monthly. I also expect the payments of IT and CT are brought forward based on the submissions.

The HMRC dream is that everybody is under some sort of monthly PAYE system. They hate the self employed.

The information submitted will all be checked by AI and as you say less humans at HMRC!

Thanks (3)
to david.bransbury
17th Oct 2018 10:45

On the whole this is the global direction of travel, not just the UK, with SAF-T (Standard Audit File for Tax) as the principle blue print.

Only a small handful of countries have made that journey so far, and the broad intentions of SAF-T have been interpreted in different ways.

MTD is just our flavour. It will take a while, but access to the source data doesn't seem like fantasy (it will just take a while *ahem*)

Thanks (0)
avatar
17th Oct 2018 10:13

Where can I find the statement about the 6 month deferrals for complex businesses?

Thanks (0)
avatar
17th Oct 2018 11:23

I have sent this to HMRC but they dont reply :

Can anyone help ?
Dear Sirs

The new guidance is published today . Please can you provide a helpline number as I want to sign up all my clients so that any problems can be dealt with prior to mandation.

At the moment despite my putting forward issues regarding two clients we have had no feed back from you concerning specific problems. The various software companies are not helping and we don’t understand the software , its really complicated to use.

We want to sign up out clients and have created a ASA and now how to we sign people up – the advice on your website dosnt seem logical. You mention the old gateway. I am totally confused. At the moment I am unable to even file my own VAT return let alone that of my clients .

We need your urgent help on a client by client basis in particular we anticipate 14 clients will call us very soon for guidance.– I have a mix of clients that need help and we have no information from you to guide them.

Thanks (5)
avatar
By Exector
17th Oct 2018 12:00

So will the 6 month exempted categories (VAT groups etc) stili be able to use the existing HMRC online VAT return facility post 31/03/19 or what? This has been billed as being retained only for non MTD voluntarily registered businesses below the VAT threshold!

Thanks (0)
avatar
to Exector
17th Oct 2018 21:40

I don't tihnk that's clear. It sounds like they are going to retain it for those exempted people (charities etc) too. I wonder how they know who is who so they can work out who the "turn the tap off" as it were.

It sounds like we use the same log in details for the new system but does that mean those of us who log in to HMRC for income tax returns keep that gateway access for that purpose but lose it for VAT?

Thanks (0)
avatar
17th Oct 2018 12:05

I have to say that I feel very strongly that as this MTD stuff is a further extension of taxpayers doing HMRCs job for them, that all costs, including software subscriptions, arising from e.g. transferring from perfectly good paper accounting, fees to professional support etc. should be 100% tax deductable.
Seems a reasonable quid pro quo.

Thanks (1)
avatar
17th Oct 2018 12:27

I would imagine that HMRC couldn't put MTD for VAT back another year so they allowed themselves the 6 months (for complex business) just in case everybody not on board at the appropriate date.
So it would appear only those business in the cloud will have access to the pilot and the rest are still waiting for the software. Sounds par for the course.

Thanks (2)
avatar
17th Oct 2018 12:35

We're getting to the messy end.

HMRC will tell clients about it sooner or later, but will gloss over the bit about needing new software and won't tell clients it will cost them more in software costs and accountants fees for absolutely no benefit to the client at all.

We'll then be left with cleaning up the mess and persuading people who don't use computers that they should now suddenly become computer whizzes so they can keep digital records.

I can't wait to wade through all those scanned receipts (not likely, clients don't bother as it takes time) which have been entered into the wrong section and taking three times as long to produce VAT Returns which big data analysis will then pick out transactions and automatically send out pointless queries.

Most of small client's reaction so far have been 'wait until April then deal with it, we're busy running our business the way we want to'.

Thanks (2)
avatar
17th Oct 2018 13:21

I have just followed the link for Agents and tried to sign up to use the system in advance of the start date. It was for a Ltd company, not on flat rate, up to date with returns etc
but it would not work.
Said come back on 1st April. Not convinced it will ever work!

Thanks (0)
avatar
to paulclewlow
17th Oct 2018 15:43

I just tried to sign up for my own VAT return and aborted the process which is unusual for me. When it said that I agreed to get emails and not letters , this was just too much. No terms or conditions were given and no guarantees. I would urge you not to sign up at the moment which would give the clearest indication yet to HMRC that this is ludicrous. I am very proactive with digital records but this is crazy. What are the benefits to anyone ?

Thanks (3)
avatar
to nodrogbir
17th Oct 2018 21:43

I think unusually there is merit in waiting, a bit like those companies who deliberately wait for new technology to bed down so their competitors get the beta and test versions and suffer from them and only move in when absolutely mandated to do so.

Howeer I would like to download (not register for but download) free bridging software now just to have a go at using it and as far as I can see there is none I can download.

Thanks (1)
to EnglishRose
19th Oct 2018 08:59

EnglishRose , I fear you may have a wait on your hands.

No software is ‘free’ - and even the options for bridging software will require some validation of who is using it. I would be very skeptial, and highly suspicious of any provider offering a free download trial, especially without a registration of some description.

I fear this is a big data security risk.

Choose names you know and trust, research, speak to the provider, do whatever you need to do that your data and systems will be safe.

Unfortunately this means you will inevitably have to either provide cash or your details.

Thanks (0)
avatar
to rsergeant
23rd Oct 2018 13:24

I'd pay £10 for a digital download of bridging software for a one-off download I suppose which will take me through year 1 I suppose.

I still don't fully undertand this - what is an API etc.
So I learn how to use excel - ugh.... I put my invoices and expenses on an excel sheet. I go on a website and download free bridging software. that adds some kind of extra icon on the excel sheet I see on my screen eg it might say - "upload now to HMRC".

We get to April or 31 May filing date in my case and before then HMRC presumably had sent me some kind of new code numbers by post or told me where to go to register for a new kind of website HMRC are setting up for all this.

Then I go on to the excelt sheet with the new gizmo on it and I click upload directly from this sheet to the HMRC website I suppose and the gizmo embedded in the sheet or my computer can somehow communite with HMRC's website go take the data from the special excel sheet to HMRC's computer?

Is that the gist of it for excel plus bridging software?

Thanks (0)
to EnglishRose
23rd Oct 2018 13:53

EnglishRose wrote:

Is that the gist of it for excel plus bridging software?


Yes
Thanks (0)
to EnglishRose
23rd Oct 2018 14:26

EnglishRose wrote:

I still don't fully undertand this - what is an API etc.

Application Program Interface - it is something that enables the bridging software to exchange information with HMRC. Unlike GOV.UK where there is one page for all VAT businesses, I understand there are different APIs for different VAT businesses (eg voluntary as opposed to compulsory). Also, there is one API for submitting the VAT return, another for retrieving liability details etc. You don't have to worry about APIs, you 'just' decide which software you want and the software handles the APIs.
Thanks (0)
avatar
By Matrix
17th Oct 2018 20:02

Mel Stride said in a recent article that he wants to keep regulations and taxes low for small businesses.

He also says in the statement that businesses can start to file their VAT returns online under the pilot (this is already mandatory) and that this will assist them getting it right first time. How does this change anything?

He also says that businesses use digital tools every day to help them operate, so tax should not be any different. If he has read the feedback surely he would realise that MTD causes additional costs and makes it much harder to operate?

I find this all so frustrating.

Thanks (1)
avatar
to Matrix
18th Oct 2018 09:02

Unfortunately there seems to be two business worlds at the moment. Those that use tech to their advantage and are happy with it and those that don't use it because they want to, they use it because they have to. Now you cannot make a set of rules that don't cater for both (this is where Brexit breaks down). So the thing to do is to allow the transition on a natural basis for a few years until the business world as a whole are used to it, which I believe most of us talking about it have said that this should be a 5 year roll out at least.

Thanks (1)
avatar
18th Oct 2018 08:30

If HMRC and Mel Stride etc wants a simple system why are they constantly fragmenting the tax system.

For VAT filing they will have to maintain a 2 tier system for ever and a day due to the ongoing exemptions.

Thanks (1)
18th Oct 2018 10:27

https://www.gov.uk/government/publications/making-tax-digital/overview-o... says partnerships won't be able to join the public beta until 'early 2019'. When is 'early'? Most accountants will be working flat out with Tax Returns in January, so 'early' will be 01/02/19 at the earliest. Mandation is a mere two months later. This isn't Carter compliant.

Thanks (2)