Welcome news as HM Revenue & Customs postpones the introduction of Making Tax Digital for VAT (‘MTD’) for NHS Bodies until April 2025

A recent announcement from HMRC has confirmed a delay to the introduction of MTD until at least April 2025 for bodies using the GIANT (Government Information and NHS Trusts) system to submit VAT returns.

The comments from HMRC will be welcomed by NHS Bodies following an announcement this month that will create additional workload for NHS Bodies in respect of VAT compliance.  Complying with MTD in other sectors, with more straight-forward VAT accounting, has been problematic, and generated high profile criticism from taxpayers and their advisers, as well as professional bodies.

Whilst HM Treasury’s appetite to shift towards a more digital tax landscape is understandable, the difficulties for NHS Trusts and other government bodies complying with the rules should not be underestimated.  HMRC’s decision to delay, but only by twelve months, shows its intention to press ahead with implementing the regime and for many NHS Bodies there simply will not be sufficient time to prepare.

It is interesting to note that historically, HMRC have linked the introduction of MTD with the ongoing review of s.41 VATA94 but have deviated from this position in their most recent announcement.  NHS bodies will be frustrated by the lack of clarity on reforming s.41 and as one of the leading advisers in this sector, we will continue to press HMRC for updates.

What is MTD?

MTD requires organisations to maintain VAT records in a digital format, and submit VAT data with MTD compliant software.  The aim of MTD is to move to a more automated process, which HMRC consider will reduce errors in VAT data and lead to more accurate submissions, and more accurate tax collection.

What do I need to do to prepare for MTD?

Whilst the deferral allows for additional time to prepare for the introduction of MTD, there is no time for complacency, and Trusts should continue on their journey towards compliance, by:

• Reviewing processes and identifying areas where data is not digitally linked;
• Understanding where manual calculations, adjustments and other amendments are made to data, which will need to be undertaken in an MTD compliant way;
• Ensuring that the process is compliant end to end, where necessary (i.e. posting invoices and journals);
• Considering whether current software allows for digital submission, and if changes will need to be made to the process or data before it is ready to submit.

What if I’m not ready?

HMRC are likely to take a pragmatic approach, and apply a ‘light touch’ to NHS bodies which are non-compliant by the launch date, but can demonstrate that they have taken steps towards compliance.  HMRC have been known to penalise those making no, or limited effort to comply.

How Can BBVAT Help?

We have experience of working with a range of organisations and undertaking readiness reviews in advance of MTD.  If you would like to know more about the review, and how we can support your Trust, contact your usual BBVAT consultant or via the helpline below:

VAT HELPLINE