Taxation ( Overview of Making Tax Digital )

Overview of Making Tax Digital

Introduction to 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.

HMRC’s ambition is to become one of the most digitally advanced tax administrations in the world. Making Tax Digital is making fundamental changes to the way the tax system works – transforming tax administration so that it is:

  • more effective
  • more efficient
  • easier for taxpayers to get their tax right

Making Tax Digital for VAT

HMRC have taken a major step forward in this ambition with the introduction of Making Tax Digital for VAT. Our pilot service is open to around half a million businesses whose affairs are up to date and straightforward. We will extend to most other business types over the coming months.

VAT-registered businesses with a taxable turnover above the VAT threshold are required to use the Making Tax Digital service to keep records digitally and use software to submit their VAT returns from 1 April 2019.

The exception to this is a small minority of VAT-registered businesses with more complex requirements. As part of planning for the VAT pilot, HMRC continued to engage with stakeholders and listen to their concerns about business readiness for Making Tax Digital. We have made the decision to delay mandation for these customers until 1 October 2019 to ensure there is sufficient time to test the service with them in the pilot before they are mandated to join – see the timeline below.

Making Tax Digital for VAT timeline

Date Activity
October 2018 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. 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. Those customers with a default surcharge within the last 24 months will be able to join the pilot by the end of October 2018.
Late 2018 Private testing begins with partnerships, those customers that trade with the EU, and users of the Flat Rate Scheme.
Late 2018 / early 2019 Open to other sole traders and companies who are not up to date with their VAT and businesses newly registered for VAT that have not previously submitted a VAT return.
Early 2019 Open to partnerships and those customers that trade with the EU.
Spring 2019 Pilot open for Making Tax Digital customers that have been deferred.
April 2019 Making Tax Digital mandated for all customers (except those that have been deferred).
October 2019 Making Tax Digital mandated for customers that have been deferred. The 6-month deferral applies to customers who fall into one of the following categories: trusts, ‘not for profit’ organisations that are not set up as a company, VAT divisions, VAT groups, those public sector entities required to provide additional information on their VAT return (Government departments, NHS Trusts), local authorities, public corporations, traders based overseas, those required to make payments on account and annual accounting scheme users. The deferral will apply to around 3.5% of mandated customers.