Have you received a letter from HMRC about Making Tax Digital?
If so, you’re not alone.
About 200,000 HMRC Making Tax Digital letters have been issued to businesses to let them know about the new service and how VAT record keeping and the way that VAT returns are submitted will change from April 2019.
HMRC has sent the first 20,000 letters to businesses and more will be going out soon. Therefore if your business hasn’t received a letter yet, that’s not to say it won’t.
Why Making Tax Digital will benefit your business
Making Tax Digital is one of the most important changes to UK businesses ever. Not only will it help to reduce errors when it comes to dealing with business admin, it will enhance productivity for your company too. Spending less time on admin so you can build your business is important – by moving to digital accounting, businesses can save an average of £17,000 / 27.6 days per year.
Why has my business received a letter?
If your business has received one of the HMRC Making Tax Digital letters, you will need to change the way you submit your VAT. The contents will provide you with an overview of Making Tax Digital, why it’s happening and what you need to do to join the service. In the words of one of the letters from HMRC: “We are changing how businesses need to keep their VAT records and submit their VAT returns. This new service is known as Making Tax Digital.”As a recipient of one of the letters, it also means you’re eligible to join the Making Tax Digital VAT pilot (see “What is the public beta phase of the Making Tax Digital VAT pilot?” below).
What does the letter (and Making Tax Digital) mean for me?
It means that from 1 April 2019, the way you keep your records and submit VAT returns will change. From that date, HMRC will require your business to keep records digitally, while the submission of VAT data will need to be done via functional compatible software.
However, you don’t have to wait until that date to join the scheme – you can make the change now by joining the public beta phase of the Making Tax Digital VAT pilot.
What happens if I’ve not received a letter?
HMRC will be sending out more letters to businesses, so there’s a chance you will receive one. However, there are a number of exemptions and deferrals for MTD for VAT to be aware of too.
What is the public beta phase of the Making Tax Digital VAT pilot?
The public beta phase of the MTD VAT pilot was launched by HMRC in October 2018. It was opened to approximately half a million businesses that were found to have met the initial eligibility criteria and will be required to use the service from April 2019.
By signing up for the pilot, your business will have the chance to get used to the new service and start testing it too. It will also help HMRC to trial the service and make sure it’s in working order ahead of 1 April 2019. At Sage, we have several products in the public beta and have already supported successful submissions on the new platform.
According to Theresa Middleton, director, Making Tax Digital for Business Programme, in a press release announcing the launch of the public beta: “The pilot is open to sole traders and companies (except those which are part of a VAT group or VAT Division) provided they are up to date with their VAT and have not incurred a default surcharge in the last 24 months.
“Those who trade with the EU, are based overseas, submit annually, make payments on account, use the VAT Flat Rate Scheme, and those newly registered for VAT that have not previously submitted a VAT return, are unable to join at this point.”
What do the HMRC Making Tax Digital letters say?
Two versions of the letters have been sent out by HMRC so it can monitor the effectiveness of the messaging. This means if your business has received a letter, you are unlikely to have seen the other version.
You can participate in HMRC’s public beta – this will help your business in its preparations and will aid HMRC ahead of April 2019.
Remember, it pays to prepare your business for Making Tax Digital now as April 2019 isn’t a long time away.