Making Tax Digital for VAT: some progress at last but still a long way to go
Susan Cattell looks at recent developments on MTD for VAT and outlines some ongoing concerns.
After months of uncertainty about the details of Making Tax Digital for VAT – and increasing concern about the lack of vital information, as the date for mandatory implementation (April 2019) draws nearer – HMRC published three documents on 13th July 2018.
- VAT Notice 700/22: Making Tax Digital for VAT
- Software suppliers supporting Making Tax Digital for VAT
- Making Tax Digital for Business – stakeholder communications pack
At the end of July HMRC also ran several Talking Points webinars for agents to publicise the documents, run through key aspects of the VAT Notice and answer questions.
Progress is being made - at last – but concerns remain, particularly about the delay to the public phase of the pilot.
VAT Notice
There have been two consultations on draft versions of the VAT Notice; ICAS submitted comments to both. There have been some notable improvements to the Notice since the first draft.
ICAS specifically asked for an example (of where digital links are required) to be included that would cover a large non-corporate group – for example a large estate. This has been addressed by amendments to example 6 in Part 7 – which now refers specifically to farms and large estates.
Other ICAS comments are reflected in the wording of paragraph 3.3.3 on supplies received where the amount of input tax to be claimed is not known at the time of recording the supply.
The notice also provides more details and clarification (in paragraph 3.3.2) on the requirements for supplies made: including an example of multiple sales in a single retail offer and information on property owners receiving data from letting agents (and other supplies made by third-party agents).
There are numerous issues which are still not covered in the VAT Notice, but we understand that HMRC is planning to issue guidance outside the VAT Notice to cover some of these. We also understand that HMRC will be working with charity representatives to find out what additional information charities might find helpful.
A polling question on the HMRC Talking Points (Making Tax Digital for Business and VAT) at the end of July revealed that only 17% of over 800 agents taking part had read the VAT Notice. A recording of the webinar is now available and should be a useful introduction for agents who have not yet found time to read the Notice.
Software suppliers list
A major obstacle to businesses and agents wanting to start preparing for MTD for VAT has been the absence of an HMRC list of ‘approved’ software ie software which will file the VAT returns in compliance with MTD requirements. The list published on 13 July falls short of being such a list but it is a step in the right direction.
The list identifies software suppliers in the pilot who have tested their products in HMRC’s test environment and already demonstrated a prototype of their software to HMRC. The list will be updated as testing progresses.
An ongoing concern is that there is still no confirmation from HMRC that software appearing on an eventual ‘approved’ list will have been checked to ensure it meets all the MTD record keeping requirements as well as having the ability to file the VAT returns. Many businesses will lack the ability to check this for themselves.
Communications pack
This is intended to help stakeholders - who can use the contents to inform their own communications activity to their clients, customers or members. Most of the main tax and accounting professional bodies have already issued communications on matters covered by the pack.
We understand that HMRC will be issuing communications to businesses, but the timing and details are uncertain. Businesses need time to prepare, but HMRC is reluctant to launch a major communications campaign until a range of software is available and the pilot is in its public phase. This still appears to be some way down the line, so it remains to be seen whether adequate HMRC communication will take place in time.
MTD VAT Pilot
The government promised businesses ‘well over a year of testing’ before mandatory implementation of MTD but clearly, this will not be delivered for VAT. The pilot may have launched in April but only a tiny number of businesses were able to join then.
The pilot remains in its private phase – so it remains the case that only very small numbers of businesses and agents are allowed to take part. HMRC has selected these from volunteers and they are all simple, straightforward businesses; they must also be using software from a supplier in the pilot.
Worryingly, the public phase of the pilot (when more businesses will be allowed to sign up) has been delayed until later in 2018. One major concern is that by the time more complex businesses are allowed to join the pilot it will be too late to allow adequate testing – or to fix any problems identified.
Anyone interested in joining the pilot can email HMRC to register an interest. HMRC has said that it will let volunteers know when they can join.
Let ICAS know your views on MTD for VAT
Have you joined the pilot? If so how is it going? If you haven’t been able to join yet what are your main concerns? What are you doing to prepare clients?
Have any comments?