HMRC pilot for MTD now public

Making Tax Digital (MTD) has long been a predominant topic of discussion in the accountancy world, and now it is becoming ever more a reality.

On Tuesday 16 October, HMRC announced that the testing phase for the first implementation of MTD has gone live for public testing.

According to Brian Palmer, a tax policy expert for the Association of Accounting Technicians (AAT), “500,000 businesses will [now] be able to join, with a further 100,000 able to apply by the end of this month.”

“From now, provided they haven’t incurred a default surcharge in the last two years, just over 45% of the approximately 1.1 million VAT-registered entities required to keep digital records and file MTD-compliant VAT returns from April next will be able to apply to on board early.”

Until now, the pilot run has been private to all but a select group of accountants and their businesses since earlier this year. However, now this has gone live, the majority of businesses with a VAT taxable turnover of at least £85,000 will be able to join at this stage. From 31 March 2019 onward, it will be a legal requirement for these companies to file all of their VAT returns digitally.

However, Palmer emphasised that “those who trade with European Union State members, charities, and businesses which pay VAT on account are among those businesses who remain excluded from the pilot.”

The list compiled by AAT of those VAT-registered companies who cannot yet apply to be part of the test pilot are the following:

• those who trade with the EU
• based overseas
• submit VAT returns annually
• make payments on accounts
• newly registered and have not yet filed a return
• members of VAT groups of VAT divisions
• received a Default Surcharge in the last two years (although these will be able to be a part of the pilot by the end of the month)
• unincorporated not-for-profit organisations
• trusts
• local authorities who complete VAT form 21
• public corporations

For those businesses in which any of these bullet points are applicable, HMRC has published a timetable that will provide more information as to when those who exist in each of these categories will be able to join the pilot. Of course, there is the ongoing concern that many businesses who qualify for joining the beta phase have not yet made the necessary preparations, or are not aware that they fall into the first cohort.

Furthermore, HMRC has reported that 3.5% of those mandated will not be able to join the scheme before the end of December this year – it is likely that this cohort will have their mandate pushed back until this time next year. Those affected will include:

• VAT groups or VAT divisions
• overseas traders registered for VAT
• trusts
• local authorities
• public corporations

HMRC has added that those in this deferral group should be contacted directly by them – it is certainly worth checking their website for more information. All pertinent information HMRC has released about MTD can be found here.

Brian Palmer has recommended that “if your business is in a position to do so – as one in three AAT members told us they were at the end of September – it makes total sense to engage with the pilot as soon as possible. That way, you can get fully involved with the opportunity to test the system in full and train up all affected employees and clients where needed. In addition, you’ll be in a position to let HMRC know of any remaining teething problems prior to mandation itself.

“If your business isn’t ready to join the pilot, I’d strongly advise that you start planning immediately to ensure the business can join well ahead of next April. There will be no prizes on offer for waiting. Of the 150 or so providers who have said they will provide MTD-compliant software, over 70 have already had their solutions recognised on HMRC’s website.

“If you think it wise to test the system in full before next April, and your provider is ready, there’s little point in waiting, you might as well enrol to join the pilot straight away.”