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:
- Use software to submit your VAT returns – how businesses can sign up for the MTD for VAT pilot.
- Agents: Use of software to submit VAT returns – how agents and their clients can sign up for the MTD for VAT pilot.
- Find software suppliers for sending VAT returns and Income Tax update – a list of HMRC-recognised software packages that support the income tax and VAT MTD pilots. Thrity-three programs are on the list for VAT as the public beta phase begins.
'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.