HMRC has announced that it will delay mandation of MTD VAT for a small minority of VAT registered businesses with more complex requirements until 1 October 2019.

With regard to charities, the point at which they are able to join the MTD VAT pilot and are mandated to  the MTD VAT rules will depend on their individual circumstances and whether they fall into one of the deferred categories.

So, for example, a charity that is :

• a not for profit organisation that is set up as a company is mandated to MTD VAT from 1 April 2019, unless they fall into one of the deferred categories (e.g. VAT group)
• a trust or a not for profit organisation not set up as a company is mandated to MTD VAT from 1 October 2019.

Customers who do not fall into one of the deferred categories must keep records digitally and use software to submit their VAT return from 1 April 2019.

CTG has been sent a copy of a deferral letter received by a charity. HMRC expects to write to all deferred organisations by February 2019, so if you have not yet received a letter, but expect to be deferred please keep an eye out for the letter and/or contact HMRC if you do not hear from them in the next month.

Making Tax Digital deferral letter

HMRC has confirmed that the pilot is now open for VAT businesses and their agents who are mandated to use the service from April 2019. You can find out what MTD software is available for the VAT pilot by visiting the software choices page and this will continue to be updated as the pilot progresses and more products become available. An update for agents operating Making Tax Digital has also been published (this is also a useful reference document for charities too).

Responding to the original announcement, CTG Chairman, John Hemming commented

“We welcome the news that HMRC has recognised the need to defer by 6 months the mandation of MTD for business with complex requirements. Charitable trusts and charitable companies in VAT groups will benefit from this deferral, giving them more time for developers to develop the software and charities the opportunity to choose a product that provides the full digital solution rather than rush into a temporary half-way house solution to satisfy the “soft landing requirements”. 

“In practice, feedback that we have received to date suggests that compliance with full digital link MTD requirements, by April 2020 is going to be trickier than the soft landing when just an API connection is required. For this reason it is very disappointing that HMRC has not agreed to extend the soft landing period by six months for the deferred organisations. This will leave them with a shorter amount of time than other organisations to make sure that their software solutions and digital link arrangements work. Extending the soft landing period for deferred organisations would be a simple and pragmatic step by HMRC.”

*UPDATE* We are very pleased to confirm that HMRC has taken our feedback on board and announced that the soft landing period will apply for a full 12 months for all customers, effective from their mandated start date. Read more here.