Making tax digital: pilot communication

Members should be aware that HMRC is contacting clients directly about their MTD obligations

HMRC has started issuing letters to eligible businesses to inform them of their MTD obligations. Members might find it annoying as these letters are going directly to their clients without their knowledge.

As these businesses may be relying on their agents to make help make them MTD compliant, it is advisable to contact all MTD-eligible clients to warn them about the possibility of receiving a letter and to speak to them about their preparations.

HMRC expects about 200,000 businesses to join MTD from April 2019; it has issued letters to around 20,000 businesses and will be recording the impact of these before sending out further batches in the next few days.

What do the letters include?

Mainly these letters highlight:

  • the responsibilities of the businesses to comply with their MTD duties
  • the need to contact accountants
  • that businesses should visit the website for further guidance and to sign up for the pilot scheme.

Who can sign up to join the pilot?

Currently the MTD pilot scheme is open to:

  • sole traders
  • companies (except those that are part of a VAT group or VAT division) provided they are up to date with their VAT.

The MTD pilot is not yet available (but will be soon) to those who:

  • trade with the EU
  • are based overseas
  • are on annual accounting
  • make payments on account
  • are on the VAT Flat Rate Scheme
  • are newly registered for VAT and have not previously submitted a VAT return
  • are trusts or charities
  • are partnerships.

According to the HMRC timeline, businesses with a default surcharge within the last 24 months will be able to join the pilot by the end of October 2018.

What are the vital elements of MTD?

  • It will be a legal requirement for businesses and organisations to maintain digital accounting records. It will not be possible to maintain paper records once the business has to be mandatorily compliant with MTD.
  • It will be mandatory for businesses to use a functional compatible software product to submit their returns to HMRC through HMRC’s API (Application Program Interfaces) platform.

Next steps

ACCA has partnered with Bloomsbury Professional Publishing to provide members with free practical guidance on MTD VAT implementation. This tracker has been designed exclusively for ACCA members and is regularly updated with new sections.

Interested members are able to sign up to the MTD Tracker for more explanation on various related questions.