MRC has published a stakeholder communications pack offering guidance about the requirements of Making Tax Digital, which will see VAT-registered businesses with a taxable turnover above the registration threshold required to keep and submit digital VAT business records and make digital VAT returns from 1 April 2019.
HMRC launched a private pilot of Making Tax Digital for VAT in April 2018, working with software providers in order to test its systems and their products. The guidance suggests this will become a public trial ‘later in 2018’, having previously indicated it could begin this summer.
HMRC will not be offering its own software products, but will provide the application programming interfaces (APIs) that commercial software developers will use to develop a range of applications that will enable businesses to keep their records digitally and integrate with HMRC systems.
The guidance describes the VAT trial as ‘a private pilot available to invited volunteer VAT businesses and their agents’ and says that ‘for now, we are limiting the number and types of business we invite into the pilot.’
According to HMRC’s latest update, more than 130 software suppliers have told HMRC that they are interested in providing software for Making Tax Digital for VAT, of which over 35 have said they will have software ready during the first phase of the pilot, which involves small numbers of invited businesses and agents.
So far, 18 suppliers including Intuit, IRIS, PwC, Xero and Sage, are listed as having tested their products in HMRC’s test environment and having demonstrated a prototype of their software to HMRC.
The guidance states: ‘We’ve invited a small number of volunteer VAT businesses who meet a specific set of eligibility criteria to join. Some are represented by agents and others are unrepresented. As we continue testing, we’ll increase the numbers and start to invite businesses with more complex features.’
HMRC also says it will provide more detailed guidance about the operation of Making Tax Digital for VAT after the launch of the public service later this year.
In March 2018 HMRC launched a pilot for Making Tax Digital Income Tax pilot on a voluntary basis. It will not be mandatory for businesses until at least 2020.
Businesses can sign up if they are a sole trader with income from one business and/or are landlords (except those with furnished holiday lettings).
If a business that signs up to Making Tax Digital for income tax has no other income to provide to HMRC they will not need to complete a separate self assessment return for 2018/19.
The stakeholder communications pack says: ‘Where additional personal income needs to be reported, such as employment income, bank and building society interest, dividends and gift aid, additional functionality will be made available in the coming months to allow software providers to build this into their products, meaning many more businesses will be able to send all of their additional personal income details using MTD.’
It also states that the income tax pilot ‘continues to be developed and additional functionality to allow more business to join will be released in the coming months’. This will include the ability to report other sources of income through software e.g. bank interest and dividends.
Currently there are four approved suppliers on HMRC’s list for Making Tax Digital for income tax: Absolute, Forbes, IRIS and Rhino.
HMRC says the communication pack provides information for firms, agents and others, who can use the contents to inform their own communications activity and key messages for their clients, customers or members.
As well as explaining the background to Making Tax Digital, it includes details of the pilots and encourages stakeholders to get involved in these, and to ensure that they and their clients are aware of new digital requirements.