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MTD VAT: Six month deferral for complex businesses

MTD VAT: Six month deferral for complex businesses

The mandatory Making Tax Digital start date will be October 2019 for certain businesses with ‘more complex requirements’.

Chris Downing

Partner, Tax

KPMG in the UK


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On 16 October HMRC announced that they have “listened to concerns and will give a small group of customers with more complex requirements a further 6 months to prepare”. The mandatory start date for Making Tax Digital for VAT will remain April 2019 for the majority of businesses but, for some, this will be deferred until October 2019. As the list of deferred businesses includes all those within VAT groups and VAT divisions (amongst others) this revised start date should benefit the vast majority of large complex businesses and should also allow them the chance to take part in the pilot which will be opened to them in ‘spring 2019’. Alongside this, HMRC announced that the MTD VAT pilot is now open to many other businesses with more straightforward VAT affairs and also published a timeline of when remaining businesses will be able to join. 

The revised timeline for when businesses can join the pilot and the two mandatory start dates can be found in an updated version of HMRC’s ‘Overview of Making Tax Digital’ policy paper. The businesses that will have the new deferred start date of October 2019 are defined by HMRC as follows:

“The 6-month deferral applies to customers who fall into one of the following categories: trusts, ‘not for profit’ organisations that are not set up as a company, VAT divisions, VAT groups, those public sector entities required to provide additional information on their VAT return (Government departments, NHS Trusts), local authorities, public corporations, traders based overseas, those required to make payments on account and annual accounting scheme users.”

The one year ‘soft landing’ whereby digital links within a taxpayer’s digital records do not need to be in place until April 2020 is not mentioned but, until HMRC provide clarification, it would seem prudent to assume deferred businesses will still be required to have digital links in place by April 2020, i.e. effectively a six month soft landing.

Also noteworthy within the new timetable is information on when partnerships and businesses that trade with the EU (other than those that are deferred) will be able to join the pilot. Private testing (i.e. invitation only) will commence in ‘late 2018’ and the public stage of the pilot for these taxpayers will go live in ‘early 2019’. Given the mandatory start date for these businesses remains April 2019 this gives only a very short window for proper testing.

The deferral for more complex organisations is extremely welcome and follows consistent and overwhelming feedback from stakeholders, including KPMG in the UK, that MTD should not be made mandatory for these businesses before it has been proven to work end-to-end including in HMRC’s systems for tracking the return and payment information. The timeline is still quite tight for other taxpayers given the pilot has only just opened for wider participation. Stakeholders will be watching closely to see how the system works in practice as larger numbers join in the weeks ahead. If widespread problems are experienced it is to be hoped that HMRC will continue to listen to concerns raised and only press ahead with mandation once all stakeholders are confident that MTD is running smoothly.

If you would like further details of KPMG in the UK’s advisory and technology solutions for MTD please speak to your usual contact or contact: 

Chris Downing

Peter Dylewski

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