At midnight on 7 August, VAT advisers across the land, including our own team, breathed a sigh of relief as the first main reporting period under Making Tax Digital (MTD) came to a close.
MTD went live for the majority of VAT-registered businesses from 1 April 2019, with a small number of taxpayers being deferred for six months to 1 October 2019. VAT groups and unincorporated trusts were included in these deferred taxpayer groups and so have a six month delay in their obligations.
HM Revenue & Customs (HMRC) has reported that 76% of businesses who were due to report for their June returns had signed up by the filing deadline. There were a few hiccups along the way involving the system being overwhelmed with people wanting to sign up near to the deadline. Some taxpayers were unable to submit under the new system as they did not register until too near the deadline and so had to use their existing portal. HMRC has confirmed there will be no penalties for anyone who was not able to sign up by the due date of the return. However, we would recommend taking time in the next few weeks, well before September VAT returns are due, in order to complete the registration process.
In terms of the taxpayer groups that are currently deferred, we would recommend you signing up for MTD following the completion of the September 2019 VAT return and when the repayment/payment for the return has been made and cleared through the charity’s bank account.
Many VAT return payments are collected by direct debit. There were some issues with direct debit instructions as some of these were cancelled and payments were not collected. We would encourage people to check their existing direct debit instructions are still in place once the new system is in place.
Our experience of being able to submit returns under the new HMRC API link was very good. This is by either accounting system or by using a bridging software solution for linking spreadsheets to the HMRC portal.
The submission of the return however, is only one part of the MTD process. Many organisations are struggling to make their record keeping totally digital and there are particular issues with self-accounting branches that submit manual returns, tills which do not provide digital reports and manual processes that are used to link fundraising databases. We are seeing an increase in processes being reviewed as a result of the new MTD requirements. HMRC is clear that spreadsheets do qualify as a digital record and so a simple solution is to get any manual records into your accounting system using a journal from a spreadsheet.
The MTD journey has a long way to go and we are still in the soft landing stage for those taxpayers who might be struggling to complete all of the HMRC requirements.
We can assist with all aspects of digital record keeping and VAT reporting under MTD.
Alison Hone, Partner
