HMRC has extended the Making Tax Digital (MTD) for VAT pilot scheme to sole traders and companies, allowing more than half a million businesses to test out digital tax reporting for VAT.
From 1 April 2019, all VAT-registered businesses with turnover over £85,000 must keep digital VAT records AND file their returns using compatible software.
Initially, only invited businesses were allowed into the MTD for VAT pilot scheme, launched in April 2018. This has now been extended to sole traders and companies whose VAT affairs are up to date and uncomplicated.
Most other business types will be eligible to join in the coming months, including:
- those who trade with the EU
- are based overseas
- submit annual VAT Returns
- make payments on account of their VAT
- use the VAT flat-rate scheme
- are newly registered for VAT
HMRC also announced a change in regulations for the 3.5% of VAT-registered entities with more complex requirements. They will be allowed a six-month extension before they must comply with MTD. Their deadline date to start reporting using digital methods is now 1st October 2019.
Mel Stride, financial secretary to the Treasury, said ‘Around half a million businesses will be able to start filing their VAT returns online, making it easier to get their tax right first time. More and more businesses use digital tools every day to help them operate – tax shouldn’t be different. This is a major step towards bringing VAT into the 21st century.’
If you’d like to check that your software is MTD ready, you can do that here. We would advise anyone to discuss the implications that may arise with their Accountants before applying for the MTD pilot scheme.