HM Revenue & Customs (HMRC) has this week opened a pilot scheme for Making Tax Digital (MTD) for VAT – the first phase of the Government’s digital tax reporting overhaul.
From 1 April 2019, VAT-registered businesses earning above the VAT registration threshold of £85,000 will be required to be MTD-compliant. This means that they will need to begin using HMRC-friendly software to store their VAT information and submit reports to the Revenue on a quarterly basis. Such businesses now have less than six months left to prepare.
Shortly afterwards, HMRC is expected to roll out its flagship MTD project for other taxes and types of businesses.
In HMRC’s view, the new digitised reporting system will make it simpler for businesses to manage their tax responsibilities and will save them a lot of time once users have got to grips with how it works.
Ahead of 1 April, the tax authority has invited more than half a million businesses to participate in its new pilot scheme.
Those selected – which are predominantly businesses with ‘up-to-date’ and ‘straightforward’ tax affairs – will have the opportunity to test the service in the run-up to the official rollout of MTD for VAT in just a few months’ time.
Mel Stride MP, Financial Secretary to the Treasury, said: “HMRC is transforming the tax administration so that it’s more effective, more efficient and easier for taxpayers.
“Today’s announcement means that around half a million businesses will be able to join MTD and start filing their VAT returns online, making it easier to get their tax right first time.
Theresa Middleton, Director for Making Tax Digital for Business, added: “Millions of people are already banking, paying bills and interacting with their suppliers and customers online. Using digital tools to help businesses manage their business income and expenses and get their tax right builds on this momentum and will also help them get more control over their finances.”
Businesses that are confused about MTD, what it involves or what they need to do in order to prepare should seek specialist advice sooner rather than later.