MTD for VAT pilot opened up to the majority of businesses

The Making Tax Digital (MTD) for VAT pilot moved into its public beta phase on 16 October 2018. This significant milestone means any business that meets the eligibility criteria and has acquired MTD compliant software can now join the pilot. HMRC has also announced a deferral to the start date of 6 months for some more complex businesses.

From 1 April 2019, VAT registered businesses which have turnover above the £85,000 VAT registration threshold, will need to submit their VAT returns to HMRC using software or an API enabled spreadsheet, see for more information. Approximately 600,000 of the 1.1m businesses that will be required to comply with the MTD for VAT regulations from April 2019 are now eligible to join the pilot. The eligibility criteria are expected to be relaxed as the pilot progresses, but HMRC has yet to release a timetable for these businesses.

Businesses which cannot currently join the MTD for VAT pilot

Certain businesses and organisations still can’t join the pilot. These are any which

  • are a trust or charity
  • are part of a VAT group or VAT Division
  • trade with the EU
  • are based overseas
  • are a partnership
  • submit annual returns
  • make VAT payments on account
  • use the VAT Flat Rate Scheme
  • are a business that is newly registered for VAT and has not previously used their VAT online account to submit their VAT Return
  • have incurred a default surcharge in the last 24 months.

Note that businesses that pay their VAT by direct debit cannot sign up during the 15 days leading up to the submission date.

Businesses for which a six month deferral applies

A six month deferral will apply to around 3.5% of businesses who fall into one of the following categories:

  • trusts
  • ‘not for profit’ organisations that are not companies (this includes some charities)
  • VAT divisions and VAT groups
  • 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.

These groups will be mandated to use MTD from 1 October 2019.

HMRC has published a list of software suppliers for sending VAT returns and income tax updates in addition to the longer of list of suppliers which HMRC is working with and who are likely to release products in the near future.

Businesses can sign up to the pilot from the page: Use software to submit your VAT returns. Agents can sign their clients up to the pilot from the page: Agents: use software to submit VAT returns. Businesses should not be signed up until they are ready to file future VAT returns using functional compatible software.

HMRC has also published new videos including step by step guides to creating an agent services account and signing up to MTD for VAT.

The Tax Faculty will update the information on the ICAEW MTD hub and will consider further support for members such as webinars. The IT Faculty will update the Software for MTD content.

  • I meant to add, especially as regards the VAT Cash Accounting Scheme. 

  • The main reason given by HMRC for the introduction of MTD is that they believe they are losing tax due to poor record keeping. That may well be the case, but in the future, to rely on what various software accounting packages produce as accurate figures for VAT, without some sort of manual intervention, is a pipe dream.

  • Now three important points:  1.   Does this comment box allow the use of 'return' for paragraphs (without posting unintentionally) or do we have to submit our comment all in a straight line like this that is tough and uninteresting to read?.   2.   The long list of exclusions from ability to join MTD for VAT evidences just how far behind HMRC is in producing workable software.  This project should be canned until HMRC is up to speed.  Meanwhile, for any that don't like MTD, it shouldn't be difficult to push oneself into one of the excluded categories.  3.  Looking at the HMRC list of software suppliers it appears that some supply for income tax only and some for VAT only.  Are there any that supply for both?  Why am I going to pay a supplier to do half the MTD job, when I cannot be sure it will ever be completed?  Another very important issue: HMRC should supply free software if it wants MTD to be mandatory.  Why should I pay additional costs to file a tax return?  Problem is, HMRC don't seem to be very good at writing software.