MTD for VAT deadline: smooth sailing or a rough ride?
Friday, August 30, 2019
Four years in the planning and three Chancellors later, it has been a lengthy lead up to Making Tax Digital – and this summer was its biggest test yet.
Four years in the planning and three Chancellors later, it has been a lengthy lead up to Making Tax Digital – and this summer was its biggest test yet. August saw the first major MTD for VAT quarterly deadline come and go, and for many practitioners and businesses, it was relatively smooth sailing as they navigated it successfully. For others, it proved a frustratingly rough ride.
Sharing its latest data, HMRC reported that nearly one million businesses are in the service and have made over 900,000 VAT submissions. By 7th August, 370,000 VAT registered businesses above the threshold in the 1st stagger had signed up and 60,000 submissions were filed per day at peak times – there were even 19 businesses filing in the minute before the clock struck midnight! However, reports indicate that one in 10 businesses failed to meet the deadline.
Reflecting on HMRC’s milestone moment now that the dust has settled, the CPAA team has looked at some of the common issues faced and lessons learned from this summer’s run-in with MTD.
The general sign-up process was complicated, according to some reports of practitioners struggling to navigate the new system. Error codes 403 or 500 errors were not uncommon. Apparently, a few individuals – confused by the arduous initial stages or error messages – even attempted to sign up for a second time. The issue was compounded by HMRC being slow to process and confirm sign-ups.
Leaving it too close to the deadline was a gamble and some stragglers ran out of time to troubleshoot their problems. This was stressful for some calling HMRC for help, because despite putting extra staff on to tend the phones, practitioners reported aeons spent on hold, no extension to opening hours, and being transferred to the general helpline and not the MTD specific one. Tight timings also caught out those who pay HMRC by Direct Debit, the last day for which was 29th July.
HMRC seemed to have an issue making filing ‘obligations’ available for some, which meant that accounting software would not search for obligations based on a start and end date range or an obligation status. This resulted in an error 404 – obligations missing – or error 403 – not signed up – being returned. Some software providers did not provide an error code when a problem arose, which made it harder to investigate and resolve the issue. Many have since agreed that more explanations would have been useful around the use of obligations.
The lack of emails from HMRC confirming receipt of submissions also proved disconcerting to many. Numerous practitioners either queried, or had clients that queried, this. It is understandable to be nervous when you are used to it after submitting other types of return and could easily be misconstrued as an irregularity. However, there are no email receipts with the new service; the software tells you the status of the obligation and acts as confirmation.
As the August deadline approached, rumours circulated that HMRC had already started issuing letters saying that if they had not already filed through the new process, to forget it, file using their original method, and try again next time. For late-comers or those suffering technical headaches, the last-minute reprieve must have been most welcome!
Many will be relieved that no penalties were levied on this occasion, given the issues they experienced (although please note that HMRC is still at pains to point out the “sanctions will remain possible in cases of deliberate non-compliance”). It is natural to have some struggles with a new process like this, but hopefully those who felt some pain the first time around will be old hands by the next quarterly submission.
Reduce the pressure where you can and leave yourself time to address any problems. Make a note of not only the big filing deadlines but also the other less obvious ones. Those going into the 2nd stagger (with a return period of May to July) must remember it takes 72 hours to sign up, and 72 hours from a client signing up for an agent to be authorised. Additionally, those paying by Direct Debit cannot sign up in the 7 working days before their filing deadline or 5 working days afterwards.
Research the areas that gave you any grief. For instance, some industry experts have suggested that issues with obligations can be overcome by either opening a Business Tax Account for each client, to check the obligations listed within, or by downloading free software that details the type of error. Additionally, for those worried about the absence of a receipt of submission: a copy of the return can be viewed (and a screenshot saved) from in their Business Tax Account.
HMRC is making guidance available in the form of information, seminars and a forum, so utilise these free resources if they would be of benefit. You can sign up to attend Talking Points – agent seminars – by clicking here. Sign up to HMRC’s MTD update for agents – edition 9 of which can be viewed here. The MTD section on the HMRC Forum also has a host of useful threads and questions –
sign up using the ‘register’ link on the top right of the page.
Consider the opportunities from your and others’ experiences. Review the time taken and how you fared with the first stagger; are there improvements that can be made with your own processes? Speak to business customers who filed themselves; was it a step too far and do they want your support going forward? Did clients need more help with the first submission than anticipated; can they manage solo next time?
The CPAA is here to help members with MTD and will provide support and guidance where possible. Our Making Tax Digital Working Group will continue to monitor issues pertinent to members and liaise with HMRC, communicating members’ interests and concerns as the MTD journey continues.