Innovation and changeGovernment TechnologyHMRC launches Making Tax Digital for VAT pilot

HMRC launches Making Tax Digital for VAT pilot

HMRC is inviting more than half a million businesses to trial a pilot for a new online VAT service

HMRC is inviting more than half a million businesses to trial a pilot for a new online VAT service, ahead of new rules coming into force next year.

From 1 April 2019, under Making Tax Digital, around 1 million businesses registered for VAT with a taxable turnover above £85,000 will need to keep their VAT records digitally and file their returns using Making Tax Digital compatible software.

The pilot opens for around half a million businesses whose affairs are up to date and straightforward, and will extend to most other business types over the coming months. HMRC has also listened to concerns and will give a small group of customers with more complex requirements a further six months to prepare. This will ensure there is sufficient time for testing the service with them in the pilot before they are required to join.

Mel Stride MP, Financial Secretary to the Treasury, commented: “HMRC is transforming the tax administration so that it’s more effective, more efficient and easier for taxpayers. Today’s announcement means that around half a million businesses will be able to join Making Tax Digital and start filing their VAT returns online, making it easier to get their tax right first time.

“More and more businesses use digital tools every day to help them operate – tax shouldn’t be different. This is a major step towards bringing VAT into the 21st century.”

Theresa Middleton, Director for Making Tax Digital for Business, said: “Millions of people are already banking, paying bills and interacting with their suppliers and customers online. Using digital tools to help businesses manage their business income and expenses and get their tax right builds on this momentum and will also help them get more control over their finances.”

The initial pilot is open to sole traders and companies (except those which are part of a VAT group or VAT Division) provided they are up to date with their VAT. 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 unable to join at this point.

Private testing begins with partnerships, those customers that trade with the EU, and users of the Flat Rate Scheme in late 2018, while in October 2019 the scheme is mandated for customers that have been deferred. The six-month deferral applies to customers who fall into one of the following categories: 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 (Government departments, NHS Trusts), local authorities, public corporations, traders based overseas, those required to make payments on account and annual accounting scheme users. The deferral will apply to around 3.5% of mandated customers.

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