VAT update: VAT for MTD - what is the latest?

Published: Tuesday 17 December 2019

It feels like we have been talking about MTD for VAT for some time and, with most businesses now having made their first filing under MTD, there surely can’t be much more to say?!  

For some more complex businesses, however, the MTD journey has only just begun and HMRC has also made an announcement affecting those businesses that will struggle to have digital links in place before the end of the ‘soft-landing’ period.  

Complex businesses

Complex businesses are required to fall into line with the MTD regulations with effect from their first VAT period beginning on or after 1 October 2019.  

Complex businesses include trusts, VAT divisions, VAT groups, local authorities, traders based overseas, annual accounting scheme users and those required to make payments on account. Also on the list were public sector entities that are required to provide additional information alongside their VAT return (such as Government departments and NHS Trusts), however, HMRC has since announced that they will receive a further deferral to a date which is yet to be announced.

For a complex business making quarterly returns, its first filing deadline is fast approaching i.e. 7 February for a business with a 31 December quarter end. Please do get in touch if you need help with meeting your obligations.

A further deferral

For VAT periods starting on or after 1 April 2020 (or 1 October 2020 for those more complex businesses described above), businesses will need to have digital links in place between software programs, following the end of the 12-month ‘soft landing’ period.  

Following representations that some businesses will not be in a position to meet this deadline, HMRC has announced that those businesses with complex or legacy IT systems can apply to extend this date.  

This is not a straightforward deferral and in order to qualify, a formal application must be made to HMRC, before the end of the soft-landing period. The application will need to explain why it will not be possible to meet the digital link requirement in time, include  details of which systems cannot be digitally linked, a timetable setting out when the business expects to become compliant along with details of the controls to be put in place for manual transfers of data in the meantime.  

HMRC has advised that cost is not a sufficient enough reason to request a delay.  Examples given of possible reasons include:

  • businesses in the process of updating IT systems where implementation will not be complete before the end of the soft-landing period; or
  • where a component part of the business’s IT system is not capable of importing and exporting data from another part of the IT system and it is not possible to update or replace that non-compliant component by the end of the soft-landing period.

Although this could be good news for businesses in the process of updating their systems, or that have recently acquired another business, it will potentially only buy some extra time for others. For example, certain sectors using specialist practice management systems such as veterinary practices with manual posts on say, a weekly or monthly basis, may be able to apply for a deferral but will still need a plan in place to become compliant.

Key contacts

Julian Millinchamp
Julian Millinchamp
Indirect Tax Director
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