Making Tax Digital for VAT: reviewing the recent changes

In October, HMRC’s MTD for VAT guidance was updated, outlining a significant deferral of the initiative for certain businesses and organisations.

A small group of taxpayers with ‘more complex’ requirements will be given an additional six months to prepare for MTD for VAT, and will therefore not be mandated to use the system until 1 October 2019.

The deferral applies to: not-for-profit organisations that are not set up as a company; trusts; VAT divisions; VAT groups; local authorities; public corporations; and traders based overseas. Public sector entities required to provide additional information on their VAT return, those who must make payments on account, and annual accounting scheme users are also covered by the deferral.

Meanwhile, HMRC has also launched its second pilot scheme for MTD for VAT, inviting more than half a million UK firms to test the system ahead of its April introduction. The pilot is open for businesses with ‘up-to-date and straightforward’ financial affairs. HMRC intends to extend the pilot to ‘most other business types’.

HMRC has also begun to send businesses within the scope of MTD for VAT so-called ‘encouragement letters’. These letters were recently sent to 200,000 firms which are eligible to join the pilot scheme, and some VAT-registered businesses with a turnover just below the VAT registration threshold.

For more information on MTD for VAT, please visit the Hot Topics section of our website.