The technical team are always interested in receiving feedback from members on MTD and hearing about their practical experiences. Please email this to atttechnical [at] att.org.uk using the subject title ‘Making Tax Digital’.
- Latest news
- Making Tax Digital (MTD) scheduled maintenance
- Timetable for Making Tax Digital
- Detailed VAT Timetable
- HMRC pilots
- Agent Services Account (ASA) and Services for Agents
- Further information and guidance
The next phase of MTD
On 21 July 2020, HMRC confirmed that MTD would be extended as follows:
- MTD for VAT will apply to all VAT registered businesses, regardless of turnover, from April 2022 (currently it only applies to businesses with taxable turnover above the VAT threshold of £85,000).
- Income Tax Self Assessment (ITSA) will be introduced from April 2023, for unincorporated businesses and landlords. The government will consult later this year in relation to corporation tax.
Making Tax Digital - Deferral of Digital Links
On 30 March 2020 HMRC confirmed an extension to the deadline for implementing digital links for MTD for VAT. In announcing this extension, HMRC said: 'We understand that the impact of COVID-19 is creating extremely difficult times for all, and we are committed to helping in every way possible all those businesses facing unprecedented challenges. Therefore, we are providing all MTD businesses wiht more time to put in place digital links betweeen all parts of their functional compatible software. This means that all businesses now have until their first VAT return period starting on or after 1 April 2021 to put digital links in place.'
Making Tax Digital - Joint ATT and CIOT survey 2019
We would like to say a big thank you to those who participated in the recent survey we undertook in relation to the roll out of Making Tax Digital (MTD) for VAT, and the future of MTD.
A summary of results can be found here.
Making Tax Digital (MTD) scheduled maintenance
Details of planned downtime and service issues for Making Tax Digital can be found on the following pages:
Timetable for Making Tax Digital
MTD for VAT
MTD became mandatory for VAT purposes from April 2019 for the majority of businesses with taxable turnover above the VAT threshold (currently £85,000):
- Businesses in MTD have to keep digital records and use software to submit their VAT returns to HMRC.
- For now, businesses only have to submit the same data to HMRC under MTD as they currently do (i.e. the summary nine boxes from the VAT return), and not underlying transactional details or the contents of their digital records.
- MTD is available on a voluntary basis for businesses below the VAT threshold.
Mandation of MTD for VAT was delayed by six months for a small number of businesses with more complex requirements. MTD for VAT became mandatory from 1 October 2019 for businesses that fall into any of the following categories:
- not for profit organisations that are not set up as a company;
- VAT divisions;
- VAT groups;
- public sector entities required to provide additional information on their VAT return (such as Government departments and NHS Trusts)
- local authorities;
- public corporations;
- traders based overseas;
- those required to make payments on account; and
- annual accounting scheme users.
In order to be deferred until 1 October 2019, affected businesses need to have received a letter from HMRC confirming that this is the case .
On 27 September 2019 HMRC announced a further deferral of mandation for that use the GIANT service (Government Information and NHS Trust), GIANT users, will not be required to join MTD before April 2022. This is to enable HMRC to take into account the outcome of the HM Treasury review into the VAT refund rules for central government, which will cover future reporting requirements for GIANT users and could lead to changes to those rules. HMRC will be writing to GIANT users to inform them of this deferral. Those affected should continue to submit their VAT returns as they do now.
It was announced on 21 July 2020 that MTD for VAT will be extended to all VAT registered businesses, regardless of turnover, from April 2022 (currently it only applies to businesses with taxable turnover above the VAT threshold of £85,000).
On 21 July 2020, it ws announced that MTD for HMRC confirmed that MTD for Income Tax Self Assessment (ITSA) will be introduced from April 2023, for unincorporated businesses and landlords with income over £10,000.
The government will consult late in 2020 in relation to corporation tax.
Detailed VAT Timetable
Commencement of MTD for VAT
The exact date that businesses subject to MTD for VAT from 1 April 2019 came into the new rules depends on their quarterly return date. The rules apply to the first ‘prescribed accounting period’ starting on or after 1 April 2019. The commencement dates were therefore as follows:
|VAT quarter ends||Start of first return subject to MTD|
1 April 2019
1 May 2019
|Feb/May/Aug/Nov||1 June 2019|
For those businesses subject to the six month deferral set out above, MTD applies to the first ‘prescribed accounting period’ starting on or after 1 October 2019, meaning commencement dates are as follows:
|VAT quarter ends||
Start of first return subject to MTD
1 October 2019
|Jan/April/July/Oct||1 November 2019|
|Feb/May/Aug/Nov||1 December 2019|
We understand that, in a similar way, businesses who are below the VAT threshold and voluntarily registered for VAT will come into MTD for VAT from their first 'prescribed accounting period' starting on or after 1 April 2022.
Enrolling into MTD for VAT – timetable
When enrolling yourself or clients into MTD for VAT it is vital that you get the timing right. Once signed up, HMRC will expect all future VAT returns to be filed through MTD software – including those for current / previous periods which have not yet been submitted. Further, there are additional restrictions on the sign up periods, particularly for businesses who pay by Direct Debit.
More information on the steps agents need to take to sign clients up for MTD for VAT can be found here.
MTD for Income Tax pilot
MTD for Income Tax trials entered their public beta testing phase on 15 March 2018. Taxpayers can sign up for the pilot here.
To take part in the pilot, businesses will need to record their income and expenses in MTD compliant software which lets them send quarterly income tax updates to HMRC. At the end of the accounting period, they will need to send a final report to confirm their income and expenses for the year. If they need to claim allowances and reliefs, they can do this within that final report. They will then be able to see a tax calculation for the year in their business tax account as well as through their software.
Likewise, agents that sign clients up to the pilot (including clients whose digital records are being kept by the agent and clients that keep their own digital records) will need a software package that lets them send the updates to HMRC on their clients’ behalf.
The current list of MTD for Income Tax compatible software products is set out on GOV.UK here. We understand that there are a number of other products at various stages of development and HMRC have said that they will continue to add to this page as new products become available.
Agent Services Account (ASA) and Services for Agents
In order to access MTD services and to supply updates on behalf of clients, agents need an Agent Services Account (ASA). This is in effect a new Government Gateway to access the new service. Each agency will have just one ASA per firm, and will be able to set up staff with administrator or assistant access to the account. Many firms may already have created an ASA in order to submit Trust Registration Service returns.
A basic outline of the ASA and how to set one up can be found here. Further information on the ASA can also be found in the HMRC guidance Making Tax Digital for VAT as an agent: step by step.
When you first set up your ASA account you will be given a new set of credentials. It is very important that you keep these safe, as HMRC have said they are unable to advise agents of the credentials they were given on set up. Instead, if an agent loses their ASA credentials they will have to contact the VAT helpline, who will delete their ASA account. They will then be required to set up a new ASA account from scratch.
Enabling primary legislation for MTD for businesses for both Income Tax and VAT is included in Sections 60 to 62 and Schedule 14 of Finance (No.2) Act 2017 which received Royal Assent on 16 November 2017. The explanatory notes to the original Bill can be found here.
In September 2017, the Government launched a consultation on draft secondary and tertiary legislation for MTD for Income Tax. The response submitted by the ATT can be found here. This legislation has not yet been finalised.
The final MTD for VAT Regulations SI 2018/261 were laid before Parliament on 28 February 2018 and came into force on 1 April 2019.
VAT Notice 700/22: Making Tax Digital for VAT was published on 13 July 2018. This Notice sets out the detailed requirements of MTD for VAT, including record keeping and digital links.
Further information and guidance
HMRC’s most common MTD customer support queries
This document summarises the most common of HMRC’s customer support issues for MTD and the associated HMRC guidance, including:
- Accessing software
- Viewing data in the account
- Does MTD impact other services? eg ECSL, deregistration
Exemption from Making Tax Digital
Businesses do not have to follow the MTD for VAT rules if any of the following apply:
- It’s not reasonably practicable for them to use digital tools to keep their business records or submit VAT returns due to age, disability, remoteness of location or any other reason (often referred to as ‘digital exclusion’).
- They are subject to an insolvency procedure.
- The business is run entirely by practising members of a religious society or order whose beliefs are incompatible with using electronic communications or keeping electronic records.
Where any of the above apply the business has to apply to HMRC to claim an exemption.
Further information on when exemption may be available and how to apply can be found in Section 3 of VAT Notice 700/22. If you are making claims for exemption on behalf of your clients, we would like to hear your experiences. Please email us at atttechnical [at] att.org.uk.
Businesses within MTD are required to use software to keep their records and submit returns to HMRC via their Application Programming Interface (API).
There are essentially three different types of MTD compliant software:
- Software packages that can be used to keep digital records and file returns via HMRC’s API.
- API enabled spreadsheets – spreadsheets with an inbuilt function allowing them to file returns via HMRC’s API.
- Bridging software which can take return information from an existing spreadsheet and submit this to HMRC via their API.
Where a spreadsheet is used, the relevant data must be digitally transmitted from the spreadsheet or other source where the digital records are kept, directly to HMRC. The summary information for completion of the VAT return must not be physically re-typed into another software package.
Making Tax Digital webinars
The ATT and CIOT have hosted several successful webinars on MTD.
The most recent of these was held on the morning of 21 February 2019 and the recording and slides can be found here.
Previous ATT/CIOT webinars on MTD for VAT were held on:
- 20 November 2018 (see here for a recording, slides and Q&As)
- 7 June 2018 (see here for slides and here for Q&As)
Other information and guidance
HMRC have produced a Making Tax Digital for Business – stakeholder communications pack which contains a variety of information for both Income Tax and VAT, including some frequently asked questions.
HMRC have also published the following MTD updates for agents:
- Making Tax Digital Update for Agents Issue 13: 22 July 2020
- Making Tax Digital Update for Agents Issue 12: 17 December 2019
- Making Tax Digital Update for Agents Issue 9: 16 August 2019
- Making Tax Digital Update for Agents Issue 8: 5 July 2019
- Making Tax Digital Update for Agents Issue 7: 14 May 2019
- Making Tax Digtial Update for Agents Issue 6: 30 April 2019
- Making Tax Digital Update for Agents Issue 5: 29 March 2019
- Making Tax Digital Update for Agents Issue 4: 4 March 2019
- Making Tax Digital Update for Agents Issue 3: 14 February 2019
- Making Tax Digital Update for Agents Issue 2: 11 January 2019
- Making Tax Digital Update for Agents Issue 1: 20 December 2018