HMRC sends out letters of encouragement for MTD

With just five months left until the first implementation of Making Tax Digital (MTD), HMRC is ramping up their communication and have issued the first batch of an estimated 200,000 letters to encourage eligible businesses to join the pilot.

The public beta phase of the MTD VAT pilot was launched by HMRC in October 2018. By signing up for the pilot, businesses will have a chance to start using the new service and test it, which in turn will help HMRC ensure the service is in good working order ahead of the April 2019 launch.

Letters have been issued directly to businesses (not copying their agents) explaining the changes to the way VAT records and transactions will need to be recorded from April 2019, inviting them to become part of the initial pilot.

Since 5 November, 20,000 letters have been sent out to businesses, with a further 180,000 letters to be issued week commencing 12 November. Two variants of the encouragement letters were sent in order for HMRC to monitor their effectiveness, both holding the same message but written in slightly different ways. Which version a business receives has been selected at random to ensure impartial results.

“While it was not cost effective to send copy letters, HMRC does recognise that it is important that agents are aware of the letters and what they say, so are happy for us to summarise the content.  Many of our members will use this as an opportunity to communicate with their clients about MTD and what they need to do to get ready” says Brian Palmer, Tax Policy Adviser at AAT and CEO of Tax Policy Advice.

A short summary of their contents below:

Version 1

The longer of the two, this letter explains that the way that businesses keep VAT and submit VAT returns to HMRC is changing. They clarify which businesses are eligible for this change and that those in scope will need to keep their records digitally, either using software or a combination of software and spreadsheets. There is also advice on how to join the new service, with links to help and advice on

Version 2

Gives a brief overview of the changes and explains that VAT is being modernised, and it is in the businesses’ best interests to be prepared. This letter also explains which businesses are in scope as well as providing helpful links and advice from

HMRC will continue to write to those within the scope of MTD for VAT and hope to achieve this by the end of November.

If you are looking for some more information on MTD for VAT, AAT have compiled a handy guide which can be downloaded here.

Hannah Dolan is AAT Comment’s Content Editor.

Related articles