HMRC has announced that some businesses will benefit from a six-month deferral of the Making Tax Digital (MTD) VAT reporting requirements. The affected businesses are those with what HMRC calls 'complex requirements'. For these businesses the first VAT return which has to be submitted via MTD-compatible software will be the VAT return for the period beginning on or after 1 October 2019. HMRC has deemed that the following categories of business will be considered to have complex requirements:

• VAT groups and VAT divisions
• Public corporations
• Overseas traders
• Businesses that are required to make payments on account
• Businesses on the annual accounting scheme
• Trusts
• Not for profit organisations that are not set up as a company
• Certain government departments
• NHS Trusts
• Local Authorities

HMRC recognise that businesses in these categories have not had sufficient time to engage with HMRC and access the MTD pilot. HMRC ran the pilot from 1April 2018 but initially restricted the use of the pilot to those businesses which they regard as being less complex. While HMRC promised that more complex organisations would have access to the pilot at the end of the summer, this has been delayed.

For those businesses which:

• make taxable supplies above the VAT registration threshold of £85k and;
• are required to be registered for VAT but do not come within any of the above categories,

then the first VAT return which must be submitted via MTD-compatible software will continue to be the first VAT return beginning on or after 1 April 2019.

It is to be hoped that, in addition to setting out a robust timetable detailing the changes, HMRC will clearly communicate with all businesses to confirm whether they will be subject to the 1 April or 1 October commencement date as this may not be immediately obvious to all VAT-registered businesses.

Depending on whether the 1 April 2019 or 1 October 2019 deadline applies, VAT returns must be submitted by means of an Application Programming Interface (API) as the existing portal will no longer be available for VAT return submission. The API creates a two-way digital link between the business’ accounting system and that of HMRC which not only enables the VAT return details to be submitted but also allows HMRC to communicate queries back to the business in respect of submitted VAT returns.

HMRC has confirmed that there will be a 12-month 'soft landing' period during which they will not impose any penalties where the business fails to meet the additional MTD obligations relating to the recording and transfer of VAT accounting data. This 12-month period will apply to those businesses who are trading over the current VAT registration threshold and fall within MTD from either 1 April 2019 or 1 October 2019. They will respectively have until 31 March 2020 or 30 September 2020 to become fully compliant.

If you have not yet made arrangements for MTD or been told by your accountant how you will meet your reporting requirement from 1 April 2019 please get in touch and request a copy of our Are you MTD ready? checklist.

Noel Guilford