VAT Making Tax Digital – A Giant Step

Published 16/10/2018

Growing confidence

It’s official, sole traders and companies with up to date VAT affairs are now able to join HMRC’s testing phase for VAT Making Tax Digital (MTD). While testing of VAT-MTD started last April up until now it has been on a limited controlled invitation-only basis.

In what can be taken as a clear indication of the department’s confidence earlier today the VAT MTD pilot has been opened to accept all comers

New guidance

In support of the public testing phase, a suite of new and updated guidance is available to help VAT registered businesses and their agents to get to grips with the new requirement

The newly published guidance covers:

  • Use software to submit your VAT returns– A guide, outlining how a business can sign up for the MTD  VAT pilot and how to join.
  • Agents: use of software to submit VAT returns- A guide, outlining how an agent and their clients can sign up for the MTD  VAT pilot.
  • Find software suppliers for sending VAT returns and Income Tax updatelists third-party HMRC recognised software packages that support the Income Tax and VAT MTD pilots

HMRC has also published a series of videos on its help and support page:

  • How to sign up for Making Tax Digital for VAT
  •  How does Making Tax Digital for VAT affect you
  •  Making Tax Digital for VAT – what is compatible software
  •  Digital record keeping for VAT
  • Creating an Agent Service Account

Can anyone join?

From today, provided they haven’t incurred a default surcharge in the last two years, just over 45 percent of the approximately 1.1 million VAT registered entities required to keep digital records and file MTD-compliant VAT returns from April next year will be able to apply to on board early.

A further 100,000 will be able to join the public pilot by the end of this month.

Those who can’t join

There’s a small but significant list of VAT registered entities who, as yet, remain unable to join the pilot, including those who:

  • trade with the EU
  • are based overseas
  • submit VAT returns annually
  • make payments on accounts
  • are newly registered and have not yet filed a return
  • are members of VAT groups or VAT divisions
  • who’ve received a Default Surcharge notice in the last 24 months. Although, they will be allowed in by the end of this month
  • are unincorporated not-for profit organisations
  • Trusts
  • Local Authorities who complete VAT form 21
  • Public Corporations


To help them to plan, HMRC has published a timetable indicating when each of the embargoed cohorts will be able to join the pilot

3.5% to get a deferral

HMRC has reported that 3.5% of those mandated who will not be able to on board before the end of December.

This cohort will have their mandation date pushed back to October 2019.

Those affected include

  • VAT groups or VAT divisions
  • Overseas traders registered for VAT
  • Trusts
  • Local Authorities
  • Public Corporations

All of those in the deferral group will be written to by HMRC.

What is Making Tax Digital

Making Tax Digital is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs. Ultimately resulting in the end of the annual tax return for millions.

As a first stage of a wider roll out process, VAT registered businesses with VATable turnover above the compulsory £85,000 registration threshold will be mandated to join the VAT Making Tax Digital for Business regime for all return periods commencing April 2019 to meet their VAT return filing obligations.

As a minimum, they will be required to maintain their VAT records digitally and to file MTD-compliant VAT returns using third party software. Those mandated to join will no longer be able to log on to HMRC’s portal, complete and file its online return.

Those voluntarily VAT registered businesses, with VATable turnover under £85,000 will not be required to use the system, although they can choose to do so voluntarily.