Making Tax Digital Update: HMRC Letters

HMRC have been writing to VAT registered businesses about Making Tax Digital for VAT, they have confirmed that all letters have now been sent.

HMRC has issued two types of letter:
  • Awareness letters – these letters are to inform businesses who will be affected by MTD that MTD for VAT starts from the beginning of their first VAT accounting period starting on or after 1 April 2019.
  • Deferral letters – these were sent out to approximately 40,000 businesses whose start date for MTD for VAT has been deferred until 1st October 2019. 
Awareness letters
The MTD awareness letters explain that MTD is compulsory for VAT accounting periods starting on or after 1st April 2019.

HMRC cannot accurately identify which organisations are required to comply with MTD for VAT, therefore some businesses who are not required to comply may have received a letter. This includes businesses whose turnover is close to the £85,000 threshold.  It is the responsibility of a company’s owners/directors (with the assistance of their agent) to assess whether compliance with MTD is required.

VAT registered businesses with a turnover of under £85,000 are not required to comply with MTD, therefore a response nor appeal is needed to HMRC if your business fits this category and received a letter.  If these businesses want to opt in, they can, although it is important to remember than once you opt in for MTD, you cannot opt out. 

There are a few variations of the awareness letter. The different versions are to address businesses that HMRC is certain are within scope for MTD for VAT based on their turnover and those where HMRC is less certain, as well as to target those businesses that are already using software to file their VAT returns directly using XML functionality.

Deferral letters

The deferral letter sent to the businesses affected has legal force and if businesses are expecting to rely on the deferral, they need to make sure that they receive and retain the letter. If necessary, they should contact the VAT helpline to request a copy.

HMRC has confirmed that if a business which is not eligible for the deferral receives a letter in error it does not need to contact HMRC but can rely on the deferral.

If you require any guidance as to whether your business is affected by making tax digital and your requirements then please contact your local Moore cloud representative.

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