VAT-registered businesses, with a turnover in excess of £85,000 and a return period of 1 April 2019 – 30 June 2019, should have filed their first mandatory MTD return by 7 August 2019.
According to HM Revenue & Customs (HMRC), as at 7 August, 76 per cent of those required to comply had signed up to the service. However, this does also mean that 1 in 4 businesses failed to do so.
With nearly one million businesses, currently in the service, having made around 900,000 VAT submissions, HMRC are clearly pleased with progress made so far and have reaffirmed their commitment to a ‘light touch’ approach to penalties in the first year.
It has even gone as far as to waive fines altogether for those who missed the 7 August deadline, as long as the VAT return was filed on time using the old HMRC portal, in favour of supporting those businesses who are doing their best to make the transition.
Despite not levying fines, HMRC did confirm that those who had failed to meet the deadline would ‘receive a letter telling them that they missed the deadline and asking them to take action’ and that ‘sanctions will remain possible in cases of deliberate non-compliance’.
The next phase; May – July
If your return period runs 1 May 2019 – 31 July 2019, you must file your first MTD-compliant quarterly return on or before 7 September 2019.
The timing of your sign up can be critical, so it is important to ensure that you have planned this carefully and in collaboration with your adviser, if appropriate. The key points to remember are as follows:
- It takes 72 hours for the sign-up process to be completed.
- Businesses that pay via Direct Debit cannot sign up in the 7 working days before their filing deadline, and the 5 working days following it – this is to allow the DD to be moved over to the new system.
- Businesses that pay via DD should not sign up until their final non-MTD return has been submitted/payment has been taken.
In the months since the launch of MTD, HMRC has apologised for a few technical hiccups; one of which has affected some customer’s direct debit payments.
In a letter to the Treasury Committee, HMRC Permanent secretary, Sir Jon Thompson explained that the digital platform is designed to work by cancelling any existing direct debits used for paying VAT and automatically setting up a new one.
He added: “In some cases the associated online VAT account has shown incorrect statements.
We have taken steps to stop this happening in future, and we are working with those customers who were impacted to correct their accounts. Those customers should not have received either a penalty or an interest charge as a result of this technical issue.
This is in line with our public commitment to take a light-touch approach to digital record keeping and filing penalties within MTD in the first year where people are doing their best to comply.”
Deferral for more complex tax affairs and exemptions
Those with more complex VAT affairs are not required to comply until October 2019, by which point all VAT-registered businesses will need to be observing the new rules. This may include public sector bodies and some charities.
In terms of exemptions, anyone who is already exempt from online filing of VAT remains so under MTD and there is further provision for those who cannot adapt to the new service due to factors such as age, disability, or location to apply for an exemption.
MTD compliance may be confusing, but it is not optional
In communicating with monthly filers who missed their first MTD deadline on 7 June 2019, HMRC has identified a number of instances where customers think they are signed up because they are already using software.
This is incorrect; even if you already use software, you must still go through the registration process in order to ensure that you are fully compliant.
If you’re struggling to make the necessary arrangements in order to register for MTD, it’s time to speak to one of our experts. The sooner you are in control, the easier compliance will become.
How can George Hay help?
If you haven’t already, consider enlisting George Hay to assist you with your obligations under MTD, while there’s still time! If you are a client and you have questions about what is required of you under MTD, contact your usual adviser.
We want to see the businesses we work alongside continue to thrive following the implementation of MTD. Our advisers are already helping many of our clients to look at it as an opportunity, not something to oppose.
Our experts are able to work with a range of online accounting software packages including Xero, Kashflow and Sage. We can help you to choose and implement the system most suited to your needs and we can advise you throughout the transition and beyond.