In October HMRC opened the Making Tax Digital for VAT pilot and at the same time announced a six month deferral until 1 October 2019 for some taxpayers with more complex requirements.

Letters to those meeting deferral criteria

HMRC has since undertaken a detailed exercise to identify all taxpayers that fall within this group and began issuing letters before Christmas 2018 to those affected. A copy of the letter is reproduced below for information.

Any taxpayer that has a taxable turnover of, or above, the UK registration VAT threshold (currently £85,000) and does not receive this letter must report for VAT purposes under Making Tax Digital for VAT from 1 April 2019. The letter reads as follows:-

“ Letter to customers

The date you need to start using Making Tax Digital

[Entity Name: VAT Registration Number]

We are changing how businesses need to keep their VAT records and submit their VAT returns. This new service is known as Making Tax Digital.

From 1 April 2019 all VAT registered businesses must use the service if they have a taxable turnover of, or above, the UK registration VAT threshold (currently ₤85,000). Taxable turnover is the total value of everything you sell that is not exempt from VAT.

Our records show that this would normally apply to you. However, you are part of a small number of customers who do not have to start using Making Tax Digital from 1 April 2019.

You will need to start using the service for your fi rst VAT return for the period starting on or after 1 October 2019. After that date you will need to keep digital records and submit VAT returns using software that works with Making Tax Digital.

Making Tax Digital pilot

We estimate that our pilot for most VAT customers like you will start in early 2019. You will not be able to join the pilot until then. We will write to you again with details of how to join.

Please tell your representative (if you have one) about this start date.

Until your business joins Making Tax Digital for VAT, you should continue to keep records and fi le VAT returns in the same way as you do now. For example, some businesses use the HMRC online portal.

For more information about:

• how Making Tax Digital will work, go to www.gov.uk/government/publications/making-tax-digital.
• the relevant VAT Notice for Making Tax Digital for VAT, go to www.gov.uk/government/publications/vat-notice-70022-making-tax-digital-for-vat

This letter is a specific:

• direction under Regulation 25A SI 1995/2518 to continue using existing methods to file VAT returns for all periods starting before 1 October 2019 (unless you choose to join Making Tax Digital for VAT before then)
• notification of exemption under Regulation 32B SI 2018/261 from the requirement to keep an electronic account (digital VAT records)”

MTD updates for agents

HMRC recently began publishing MTD updates specifically for agents. Updates 1 and 2 are now available.

Update on pilot

Following successful completion of testing, partnerships, VAT groups and flat rate scheme users are now able to voluntarily join the MTD VAT service and begin to test the service ahead of its introduction.

Therefore the MTD for VAT pilot is now open to all businesses that will be mandated from April 2019 (i.e. the first VAT accounting period starting on or after 1 April 2019). VAT Notice 700/22: Making Tax Digital for VAT has also been updated.

According to HMRC, the pilot is progressing well. Over 3,500 businesses have already joined and there has been a dramatic increase in daily take-up from around 10–20 a day when the pilot first opened, to well over 100 a day currently, with the number of daily sign-ups continuing to grow. HMRC will continue to provide updates as the pilot continues.

HMRC wants as many eligible businesses as possible to join the pilot ahead of the mandation of the service in April (although for the majority who file quarterly, their first return won’t be due until 7 August 2019 at the earliest). HMRC are saying that increased pilot participation will allow more businesses to get used to the service before they are mandated to use it as well as giving assurance that the service works for a range of different taxpayer types. It will also give HMRC the confidence that taxpayer’s experience of the MTD service, and the support in place around it, matches expectations.

Further details can be found in the updated guidance for businesses, updated guidance for agents and the stakeholder partner packs on GOV.UK.