Making Tax Digital for VAT

Date: 17th October 2018

The Government is introducing a pilot service for submitting VAT returns digitally. The pilot service is open to around half a million businesses whose affairs are up to date and straightforward. It will be extended to most other business types over the coming months (i.e. from November 2018).

VAT-registered businesses with a taxable turnover above the VAT threshold are required to use the Making Tax Digital service to keep records digitally and use software to submit their VAT returns from 1 April 2019.

The exception to this is a small minority of VAT-registered businesses with more complex requirements. As part of planning for the VAT pilot, HMRC engaged with stakeholders in order to listen to their concerns about business readiness for Making Tax Digital. HMRC have made the decision to delay mandation for these customers until 1 October 2019 to ensure there is sufficient time to test the service in the pilot before these businesses are mandated to join.

Income Tax

Some businesses and agents are already keeping digital records and providing updates to HMRC as part of a live pilot to test and develop the Making Tax Digital service for Income Tax. If you are a self-employed business or landlord you can voluntarily use software to keep business records digitally and send Income Tax updates to HMRC instead of filing a Self Assessment tax return.

Further Information

The majority of people & businesses want to get their tax right but the latest tax gap figures show that too many find this hard, with avoidable mistakes costing the Exchequer over £9 billion a year. The improved accuracy that digital records provide, along with the help built into many software products and the fact that information is sent directly to HMRC from the digital records, avoiding transposition errors, will reduce the amount of tax lost to these avoidable errors.

HMRC consulted with stakeholders throughout the development of Making Tax Digital, both formally and informally.

The government announced in July 2017 that the pace of mandation would be slowed and that Making Tax Digital will not be mandated for taxes other than VAT until at least April 2020.

The primary legislation for Making Tax Digital relating to VAT and Income Tax is contained in the Finance (No.2) Act 2017, providing certainty about the broad framework in which Making Tax Digital will operate, with secondary legislation for VAT laid in February 2018, coming into force from April 2019.

The Government have published a VAT Notice which explains the rules for Making Tax Digital for VAT and about the digital information that must be kept.

They have also published a communication pack which supports their partnership working arrangements with stakeholders, who can use the contents to inform their own communications activity and key messages for their clients, customers or members.

Access to the full information pack, including a detailed timeline, can be made by clicking here