HMRC’s drive to become one of the most digitally advanced tax administrations in the world is gathering pace.
The first stage of Making Tax Digital is quickly approaching – it is only a matter of months until the first MTD VAT returns will need to be filed using MTD-compatible software. The use of the Government Gateway will no longer be available to those affected.
The changes will apply to VAT periods that start on or after 1 April 2019, although HMRC have confirmed that the deadlines for sending VAT returns and making payments are not changing.
It seems that although the number of VAT registered businesses is rising, there are many that still don’t know enough about MTD or HMRC’s digital transformation.
The Office for National Statistics report that the number of VAT and/or PAYE businesses in the UK has continued to grow, to 2.67 million (as at March 2017).
However, according to research by the British Chambers of Commerce, a quarter of businesses have never heard of MTD and two-thirds know it only by name or sketchy detail.
This may be of concern to HMRC, who have in recent months, published further information to try to support businesses and agents in the run up to the mandatory deadline. This includes:
- Agent Update: Issue 66
- VAT Notice 700/22: Making Tax Digital for VAT
- Making Tax Digital for Business – stakeholder communications pack
- List of software suppliers supporting Making Tax Digital for VAT
The stakeholder communications pack provides agents with a source of material and information to support any communication with their clients as to what they need to do over the coming months as MTD progresses.
It is important that all agents take a look at the communications pack, which includes important facts about MTD (including the use of spreadsheets and software for digital record-keeping), the advantages of digital record keeping, key messages for agents and businesses, additional information and support and MTD related frequently asked questions.
What should agents do next?
In preparation for the mandatory deadline agents should:
- Invest time in understanding HMRC’s plans for MTD.
- Identify which clients are VAT registered and with a taxable turnover above the VAT threshold.
- Identify which clients are not yet keeping their business records digitally and understand what help and support they might need.
- Make sure an Agent Services account has been created.
- Contact software providers to find out when they will be MTD-ready.
- Decide if any clients are to be signed up to the MTD pilot and contact HMRC to register interest in taking part.
Taking part in the MTD pilot for VAT
When HMRC launched the private MTD pilot for VAT in April 2018, they initially invited a small number of VAT registered businesses who met a specific set of eligibility criteria to join.
As testing continues through to the end of 2018, HMRC hope to increase the numbers and types of businesses able to sign up in preparation for a public beta expected to be open before the end of the year (although a date for this is still to be confirmed). This allows HMRC to test the service ahead of April 2019.
To find out more about being involved in the private MTD VAT pilot, email HMRC at [email protected] hmrc.gsi.gov.uk
What information will HMRC need?
If an agent has identified a client that would like to take part in the pilot, when contacting HMRC it may be helpful to provide the following information:
- business name.
- VAT reference number.
- the Company Reference Number or National Insurance Number (NINO) – if a partnership the named partners NINO.
- the VAT Return Period stagger you normally file your returns (for example June, September, December, March).
- the software product you use to submit MTD VAT returns.
- if spreadsheets are used to maintain business records and/or help calculate the figures used when putting together VAT returns.
- whether the business intends to take responsibility for the whole process (sign up and submission with guidance from an agent) or if an agent will act on behalf of the business for all the responsibility or a mix of both.
Once an interest is registered with HMRC, this does not automatically mean the business will be signed up to MTD for VAT. Additionally, there is no commitment to sign the business up to the pilot, if there is a change of heart by either the business or indeed the agent.
HMRC will run checks to determine the acceptance of the business to the pilot and when HMRC expect to be able to invite the business to join the pilot.
HMRC will be keen to receive feedback from all participants in the pilot. This is said to include, on occasion, follow-up contact by HMRC user researchers, to ensure that MTD for VAT will be the best it can once the segment of the industry is required to file MTD VAT returns.
This gives HMRC the ability to talk to businesses, agents and software providers to get a holistic view of how the MTD VAT Pilot is progressing.
How will TaxCalc help me be ready?
TaxCalc VAT Filer was MTD-ready in October 2018. VAT Filer will continue to allow use of the Government Gateway for those clients not signed up to the pilot or who are below the VAT threshold (£85,000).
TaxCalc MTD VAT Filer will bring you:
- an innovative way to import from Excel spreadsheets into the VAT return.
- smart ‘VAT Adjustments’ tools to amend imported VAT figures (and store the history of any adjustments).
- full use of HMRC’s APIs for VAT which include:
- Retrieving VAT periods (also known as obligations) e.g. 01/01/2019 – 31/03/2019.
- Retrieving VAT previously filed VAT data, e.g. the figures of each box on the fulfilled VAT return.
- Retrieving Payments & Liabilities, a history of the client’s VAT account.
For more info check out our MTD VAT Filer.
- Thanks to TaxCalc and the ICPA for this article.