The Government has launched a pilot for a new online VAT service and is inviting more than half a million UK businesses and sole traders to try it ahead of the UK-wide launch in 2019.
The Government says that Making Tax Digital (MTD) for VAT will "make it easier for businesses to manage their tax and will save them, and their agents, time which can instead be devoted to maximising business opportunities, encouraging growth and fostering good financial planning".
From 1 April 2019, under MTD, around one million businesses registered for VAT with a taxable turnover above £85,000 will need to keep their VAT records digitally and file their returns using MTD-compatible software.
HMRC says a small group of customers with more complex requirements will be given a further six months to prepare. The six-month deferral will apply to:
- Not for profit organisations that are not companies (including some charities);
- VAT divisions and VAT groups;
- Public sector entities required to provide additional information alongside their VAT return;
- Local authorities;
- Public corporations;
- Traders based overseas;
- Those required to make payments on account and annual accounting scheme users.
These groups will be mandated to use MTD from 1 October 2019.
In the meantime, the pilot is now open for "businesses whose affairs are up to date and straightforward" including sole traders and companies.
Mel Stride MP, financial secretary to the Treasury, described Making Tax Digital as "a major step towards bringing VAT into the 21st century".
He said: "HMRC is transforming the tax administration so that it's more effective, more efficient and easier for taxpayers. Today's announcement means that around half a million businesses will be able to join MTD and start filing their VAT returns online making it easier to get their tax right first time."
Theresa Middleton, director for Making Tax Digital for Business, said: "Millions of people are already banking, paying bills and interacting with their suppliers and customers online. Using digital tools to help businesses manage their business income and expenses and get their tax right builds on this momentum and will also help them get more control over their finances."
Eligible businesses and agents are being encouraged to join the pilot as soon as they can. More information can be found on the Government website. The deadlines for sending VAT returns and making payments are not changing.