HMRC writes to firms ahead of Making Tax Digital for VAT

Ahead of the rollout of Making Tax Digital for VAT in April 2019, HM Revenue and Customs has started writing to select businesses eligible to join the Making Tax Digital for VAT pilot.

The Chartered Institute of Taxation (CIOT) has revealed that an initial 20,000 letters have been distributed to firms eligible to join the pilot for Making Tax Digital (MTD) for VAT. MTD is designed to bring the UK’s tax infrastructure into the 21st century and VAT will be the first tax to be reported digitally from April 2019.

The first tranche of letters was delivered on 8th November to affected businesses, with an additional 180,000 letters due to follow the week after.

HMRC is staggering the release of its letters in two phases to monitor their impact. Each phase contains different content, with the aim of finding the most impactful marketing messaging for MTD.

The first phase outlines to firms the way that VAT reporting is changing and the new way of doing things if MTD applies to them. It also invites firms to join MTD for VAT early through the pilot if they so wish.

The second phase is more succinct, announcing the modernisation of the UK’s VAT reporting system and the need for firms to adapt now.

Will I receive a letter?

There are some businesses that are currently unable to participate in the MTD for VAT pilot, such as businesses who trade with the EU, partnerships, Flat Rate Scheme users etc. If a business is ineligible to join the MTD for VAT pilot, they will not receive this first wave of letters from HMRC.

If you don’t receive a letter, it may mean HMRC doesn’t want you to take part in the pilot. However, you may still be obligated to comply with MTD for VAT from April 2019.

Who is affected by Making Tax Digital for VAT and when will it apply?

MTD for VAT applies to VAT-registered businesses with an annual turnover of more than £85,000 (excluding any VAT exempt income), and applies to VAT periods starting on and after 1st April 2019.

MTD for VAT has however been deferred for a few ‘complex’ businesses until 1st October 2019, although HMRC expect this to affect only 3.5% those registered for VAT.

The first digital, quarterly VAT returns are due for submission by 7th August 2019.

Under MTD for VAT, affected businesses will no longer be able to use the Government Gateway website. Instead, they will have to submit their VAT returns via MTD-compliant software. They will also need to maintain their records digitally.

Your local TaxAssist Accountant can help with MTD for VAT

Your nearest TaxAssist Accountant can offer a free initial consultation to help your business fully understand its obligations to maintain digital VAT records.

We have already partnered with Intuit QuickBooks to provide our clients with HMRC-approved software that makes managing your VAT returns easy, wherever you are.

For straightforward, professional advice on MTD for VAT and any other aspect of MTD, call us today to arrange a free initial discussion on 01442 268000 or drop us a line using our online enquiry form.

Date published 13 Nov 2018

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.