Making Tax Digital for VAT pilot goes live

HMRC has this week launched the Making Tax Digital for VAT pilot. This is a big step forward for HMRC who have now opened the trial publicly to businesses ahead of the April 2019 mandation date.

Following on from our success in HMRC’s private beta stage, we’re really pleased to confirm that Xero will progress through to this phase of the pilot, offering the functionality to a wider group of customers. We’ve begun by extending Xero’s MTD for VAT solution to a group of customers on an invite-only basis. We’ll then look to make Xero’s beta functionality more generally available to eligible businesses in the coming weeks.

What does this mean for businesses?

From today, HMRC’s pilot is open for sole traders and companies that are up to date with their VAT and over the VAT threshold, which is estimated to be over half a million UK businesses.

HMRC has also confirmed that a small group of customers with more complex requirements, such as businesses that are part of a VAT group or VAT division, will have a further six months to prepare and will not be mandated until 1 October 2019.

The announcement of HMRC’s public beta phase is a positive step forward for Making Tax Digital for VAT. HMRC is radically changing its tax model to focus on the right technology – making it faster and easier for people to comply in real time. Part of this modernisation process is the development of new APIs and an open platform. By progressing onto public beta, HMRC is even closer to bridging the gap between itself and those businesses needing to report and pay VAT.

Xero’s commitment to Making Tax Digital

At Xero we’ve been working closely with HMRC for some time as a recognised software supplier to help ensure that Making Tax Digital for VAT is a success. To date, we’ve successfully completed a number of beta trials and will continue to partner with HMRC in the public beta phase of the pilot.

Linda Gibson, director at Xero silver partner firm Gibson Whitter, was the first to test Xero’s functionality and said: “The whole experience was seamless. It took no time at all, and Xero’s functionality worked really well.”

Whether you’re a Xero partner or a small business getting ready for Making Tax Digital, we have a dedicated set of resources to help with your Making Tax Digital journey – including webinars, toolkits, guides, videos and FAQs.

Xero’s participation in the pilot will initially involve customers via invitation-only (invitations have already been sent). We aim to make the pilot generally available to eligible businesses who want it in the coming weeks and will make announcements for this at that time. Making Tax Digital for VAT within Xero will be included at no extra cost to existing subscriptions where VAT reporting is available.

Come and see it in action at this year’s Xerocon London and learn more about how you can get your practice ready for the future of digital accounting!

If you still have questions on Making Tax Digital, contact your Xero Account Manager or email If you’re a small business, please contact your accountant or bookkeeper or touch base with our support team via Xero Central.

More on HMRC’s public beta eligibility and deferrals

HMRC’s public beta is open to VAT registered businesses above the VAT £85,000 threshold business who are sole traders and companies (except those which are part of a VAT group or VAT Division) provided they are up to date with their VAT.

Those who trade with the EU, are based overseas, submit annually, make payments on account, use the VAT Flat Rate Scheme, and those newly registered for VAT that have not previously submitted a VAT return, are unable to join at this point. Those customers with a default surcharge within the last 24 months will be able to join the pilot by the end of October 2018.

The deferral will apply to around 3.5% of mandated 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 (such as Government departments and NHS Trusts), local authorities, public corporations, traders based overseas, those required to make payments on account and annual accounting scheme users.

The functionality to allow those within these groups to join MTD will be delivered before April, but to ensure HMRC are able fully to test the service with these customers they will not be mandated to join MTD until 1 October 2019. Any business not in one of these groups and over the VAT reporting threshold (£85,000) will be mandated to use MTD for VAT from April 2019 as previously announced.

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