More details on the deferral of MTD for VAT to October 2019 for certain businesses

On 16 October 2018 the government announced that the start date for Making Tax Digital (MTD) for VAT is deferred by six months for a small group of complex businesses.

The deferral, to the first VAT accounting period starting on or after 1 October 2019, applies to the following:

  • trusts
  • ‘not for profit’ organisations that are not companies (this includes some charities)
  • VAT divisions
  • VAT groups (the deferral applies to the group registration only and not to any group companies that are not covered by the group registration)
  • public sector entities that are required to provide additional information alongside their VAT return (such as Government departments and NHS Trusts)
  • local authorities and public corporations
  • traders based overseas
  • those required to make payments on account
  • annual accounting scheme users.

With the exception of VAT groups, who can now sign up to MTD for VAT, businesses that fall into the categories listed above cannot currently join the MTD for VAT pilot.

Although HMRC has written to each deferred business, there has been a delay to approximately 5,000 letters that are due to be issued by the Non-established Taxable Persons unit in Aberdeen.

Unlike the MTD awareness letters, the letters to deferred businesses do have legal standing. Any business that wishes to rely on the deferral must ensure that it receives (and retains) the letter notifying them that their start date has been deferred. HMRC has confirmed that if a business receives a deferral letter in error they can rely on having done so and need not comply with MTD for VAT until their first VAT accounting period starting on or after 1 October 2019.

If a business understands that it is in one of the deferred categories but has not received a letter, it should contact the VAT helpline to request a letter.

HMRC has also indicated that the soft landing for digital links will apply for the first 12 months of mandation ie, for deferred businesses the digital links requirement will apply to VAT accounting periods starting on or after 1 October 2020 and the MTD for VAT notice will be amended accordingly.