Making Tax Digital for VAT Is on the Way
HMRC seeks volunteers
The government's Making Tax Digital scheme is set to take a small but significant step forward this coming April, with the launch of their “MTD for VAT” pilot. Right now, HMRC's asking around for volunteers to test out how well it all works. Essentially, they're approaching accounting firms and asking if their clients are prepared to be try out the new VAT reporting system. If all goes well, then the programme pushes toward its full-on launch.
Once the Making Tax Digital for VAT pilot takes off, all the volunteer businesses need to do is submit their VAT returns using the new platform in place of their old one. To make sure they get enough data to stress-test the system, they're offering a few incentives to climb aboard. For one thing, it's an opportunity to find your footing in the new world of digital VAT reporting before the whole thing becomes compulsory. HMRC's promising lots of help in getting used to what it does and how it works, along with plenty of updates on the developing system.
Perhaps more importantly, HMRC's putting something quite unusual on the table for businesses taking part – a chance to actually influence the final product. The feedback they get during the pilot scheme will be used to make improvements for when the full thing becomes mandatory. HMRC is promising that they won't be putting participants under the microscope during the pilot. There are no extra compliance checks to worry about, and they can quit the scheme whenever they want to.
The idea behind MTD for VAT is to cut down on reporting errors. As with the rest of the MTD scheme, it's going to rely on software that can talk directly to HMRC through “integrated digital record-keeping”. If everything goes according to plan, the full system could ultimately spell the end of annual tax returns for millions of people and businesses. For now, though, we're only in the foothills of this dazzling digital future – and that's why pilot programmes like this are so important.
Digital records are set to become compulsory for all VAT reporting from April 2019. One of the biggest challenges on the way there is developing software that will do the job. There are some pretty serious questions being raised about this at the moment, and a lot of software companies are already admitting that they simply won't have the goods in time for the pilot's launch. A few firms are a little more optimistic, though, with Sage announcing that their flagship products are on schedule to be ready and that they'll be actively recruiting pilot volunteers.
The main point to take on board, as always, is that RIFT has you covered when the MTD for VAT bombshell drops. We'll make sure you're all set up in good time, and keep you updated with everything you need to know to make a success of it. We're on great terms with HMRC, and we're using that relationship to stand up as the voice of small business in all these discussions.
The steps may be small and hesitant right now, but Making Tax Digital is coming. Get in touch with us for answers, solutions and advice.