Making Tax Digital for VAT decision tree

May 08, 2018

Making Tax Digital (“MTD”) for VAT commences in just less than 11 months on 1 April 2019. Download the Institute’s MTD for VAT decision tree now and assess if your business or clients will be affected.

Under the current timetable, from April 2019, only businesses with turnover above the VAT registration threshold (currently £85,000) will have to keep digital records, and only for VAT purposes.

Just a year after that on 1 April 2020, HMRC has stated that MTD for the other tax will commence. In April, HMRC launched the MTD pilot for income tax on GOV.UK.  Agents can now set up an agent services account and sign up to use software to send income tax updates on behalf of their clients.  Initially HMRC has opened the pilot to self-employed businesses with income from one business.  

As HMRC develops the service, additional functionality will be added and gradually businesses with differing requirements will be allowed to join.  In time, HMRC will make the pilot available to landlords with income from property and all self-employed business.

Agents can now:-

  • Create an Agent Services account
  • Link existing SA client relationships to their Agent Services account
  • Sign up new and existing SA clients to quarterly updates   
  • Submit updates through software – only applies when the agent is subscribed to agent services, the client is signed up to the MTD pilot for income tax, and the agent has enabled MTD compatible software for the client
  • Be authorised by a new MTD SA client (a digital 64-8 for MTDB)

In addition, their clients will be able to:-

  • Digitally confirm authorisation to the MTD pilot for income tax, and
  • Digitally cancel authorisation for the MTD pilot for income tax.

HMRC is continuing to work closely with software developers who are providing software packages to support the Making Tax Digital pilot MTD.  As the pilot progresses they will be making a wider range of new or updated software products available to agents and their clients.

In addition to the income tax Pilot, HMRC launched the VAT pilot recently.  Initially a small number of invited volunteers will test the service.  As HMRC are doing with the income tax pilot, HMRC will add functionality, continue to test and gradually allow businesses of differing types to join. You will be able to sign up your clients to the pilot before April 2019 when it becomes mandatory for those above the VAT threshold to keep digital records for VAT and send their VAT returns through MTD using software.

The Institute is launching its MTD hub shortly. The hub will contain a number of new resources aimed at helping members and businesses get MTD ready.

HMRC have also published an online tax agent’s blog: Preparing for Making Tax Digital (MTD) - The move to digital record keeping.