Making Tax Digital

Please use the menu below to access the latest information on MTD.

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

HMRC statement on error in recently issuing ‘VAT notice of assessment of tax’ letters to some MTD customers.

On 29 October, HMRC updated its MTD service issues webpage to confirm that it had recently issued ‘VAT notice of assessment of tax’ letters to some MTD customers.

HMRC contacted the ATT to say that if the taxpayer has already submitted the VAT return in question and paid the tax due/received its repayment, they can ignore this letter. Taxpayers can check their position using their 'HMRC online services' and agents can check this on their behalf by using the 'Manage your client’s details' service.’ HMRC apologise for any inconvenience this may have caused. 

 

Digital links – applications for deadline extension

Under the MTD for VAT rules, for periods starting on or after 1 April 2020 (or 1 October 2020 for deferred businesses) digital links must be in place for any transfer or exchange of data between software programs, products or applications used.

However, on 17 October HMRC announced that businesses with complex or legacy IT systems can apply for additional time to put the required digital links in place, subject to meeting certain qualifying criteria. This can include updating or replacing an IT system where the planned implementation date is later than the end of the soft landing period. If a business qualifies then the additional time will be granted as a specific direction.

Further detail on the criteria to qualify for an extension, and how to apply, are set out in new paragraph 4.2.1.3 in VAT Notice 700/22. A copy of the application form can be found here.

We would be interested in hearing of your experience if you, or your client, apply for an extension – please send any comments or feedback to atttechnical [at] att.org.uk  

 

HMRC launch new design for ASA landing page

HMRC has redesigned the ASA dashboard, which is the page you are directed to after signing in. Agents can now access the MTD sign up facility and the ‘update your client details’ services from this page. We attach screenshots below.

If you have any feedback please contact atttechnical [at] att.org.uk.

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Making Tax Digital (MTD) scheduled maintenance

Details of planned downtime and service issues for Making Tax Digital can be found on the following pages:

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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:

  • trusts;
  • 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.

All other businesses with taxable turnover above the VAT threshold were mandated from April 2019. 

Other taxes

The Government have stated that they will not widen the mandatory scope of MTD beyond VAT before the system has been shown to work. 

At the Spring Statement 2019 it was confirmed that MTD will not be further extended until at least April 2021, either to bring income tax within the scope of MTD, or businesses who are voluntarily registered for VAT.

HMRC have indicated that they will consult on Corporation Tax prior to making any decision as to whether or not to bring it into MTD.

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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
March/June/Sept/Dec

1 April 2019

Jan/April/July/Oct

1 May 2019

Feb/May/Aug/Nov 1 June 2019



For those businesses subject to the six month deferral set out above, MTD will 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

March/June/Sept/Dec

1 October 2019

Jan/April/July/Oct 1 November 2019
Feb/May/Aug/Nov 1 December 2019



Those on the annual accounting scheme will come into MTD on the start of the first annual accounting period starting after 1 October 2019. 

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.

HMRC have provided guidance on sign up dates for businesses in the deferred population (who are subject to MTD for their first accounting period beginning on or after 1 October 2019).  All deferred businesses should submit their last non-MTD return and ensure any payment/repayment has been finalised before signing up to MTD.

More information on the steps agents need to take to sign clients up for MTD for VAT can be found here

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HMRC pilots

MTD for Income Tax pilot

MTD for Income Tax trials entered their public beta testing phase on 15 March 2018. Taxpayers can access the service here

To take part in the pilot, businesses will need to record their income and expenses in an MTD compliant software package 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.

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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.

HMRC have also released:

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. 

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Agent and business access to digital MTD for VAT services

This information has been prepared by ICAEW and is available on their website. It has been reproduced here with their kind agreement.

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Legislation

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. 

The final 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.  It also confirms that there will be a soft landing period for certain aspects of the MTD for VAT process during the first year.  For VAT periods commencing between 1 April 2019 and 31 March 2020, businesses or groups who use more than one software programme to keep their VAT records and prepare and file returns will not be required to have digital links between those software programmes.  However, the exception to this is where data is transferred to another product solely for the purpose of submitting the VAT return data to HMRC – this transfer must be digital even during the soft landing period.  This may be relevant for those using a spreadsheet together with bridging software (see below for further discussion of software options including spreadsheets).  

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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:

  • Sign-up
  • 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. 

Businesses currently exempt from online filing, or whose taxable turnover is below the VAT registration threshold, are automatically exempt from MTD, and do not need to apply to HMRC.

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.

Software

Businesses within MTD are required to use software to keep their records and submit returns to HMRC via their Application Programming Interface (API). 

Our understanding is that 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.

The current list of MTD compatible software for VAT can be found here and for income tax here.

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:

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