MTD for VAT deadlines, signing up clients, and what’s next for MTD
Many quarterly filing businesses will be required to file their first return under MTD for VAT from August 7th. The deadline is even more pressing for businesses which pay by Direct Debit, as the deadline to register is July 27th. Businesses that do not use Direct Debit to pay their VAT are able to sign up from 24 hours after the final ‘old’ VAT submission is made.
In order to comply with MTD for VAT, businesses with a taxable turnover of over £85,000 will now be required to keep their records digitally.
Unless your client is exempted under the HMRC rules or deferred to the VAT period on or after October 1st 2019, you will need to ensure they are ready to sign up before their first MTD for VAT return is due. This will fall into one of the below sign up periods:
- Submission date of 7th August – sign up between 15th May to 23rd June
- Submission date of 7th September – sign up between 15th June to 23rd July
- Submission date of 7th October – sign up between 15th July to 22nd August
HMRC say that they are seeing nearly 10,000 businesses signing up daily, with more than 600,000 signed up in total. So far, around 400,000 submissions have been made using MTD for VAT compliant software. Interestingly, 75% of businesses in the financial sector are yet to register.
Deadlines – In brief
Direct Debit clients:
- Follow HMRC guidance on sign up dates
- Sign up seven working days prior to their first return
- Follow HMRC guidance on sign up dates
- Allow 24 hours after final ‘old’ VAT return to register
- Sign up 72 hours prior to their first return
Setting up clients for MTD for VAT
If you have clients not yet set up with MTD for VAT it isn’t too late. Sign them up using the steps below and ensure you allow 72 hours between registration and the first submission, or seven working days if they pay by Direct Debit.
In brief, you will need to follow these steps:
- Sign up for your Agent Services Account with HMRC
- Link your new ASA to your current HMRC Online Services account
- Copy over your existing SA and VAT clients
- Or register new clients and send them a link for authorization
In order to work on behalf of your clients for MTD for VAT submissions, you will first need to create an Agent Services Account (ASA) and link your current HMRC Online Services Government Gateway ID.
The client will then need to sign up as MTD for VAT registration isn’t automatic, or you can do this on their behalf. Within your new Government Gateway, you are able to copy across your existing Self-Assessment and VAT clients which will authorise you to handle their VAT returns. Signing up new clients is simple, as once you have entered their details HMRC will provide an authorisation link to email to your client.
You will be able to provide the VAT details of your client from within your ASA, which will allow you to sign them up for MTD for VAT. This part of the process should be allocated plenty of time as onboarding is repeated for each client you need to link to, and HMRC advise that once you have submitted the details, MTD for VAT set up should be completed within 72 hours.
For more details, please see the Essential Step by Step Sign Up Guide for Making Tax Digital for VAT.
Penalties and surcharges
HMRC are taking a soft approach to penalties and surcharges whilst MTD for VAT is rolled out, but that doesn’t mean your client will automatically avoid any costs if they miss their MTD for VAT deadline.
Importantly, HMRC are not issuing penalties and surcharges to businesses which “try their best” to comply, so it’s vital to take proactive steps if a deadline has been missed. Ensure your client has paid any VAT owing, then set up the business for MTD for VAT if you haven’t yet done so.
Whilst there is no timeline given for mandation of MTD for Income Tax, your self-employed clients can voluntarily use software to keep their records digitally and send their Income Tax updates to HMRC instead of filling out a self assessment tax return.
Additionally, with new Making Tax Digital rules postponed into 2021 and the MTD for Income Tax pilot running currently, we are still awaiting firm dates for mandation of further MTD schemes. Collaboration with software developers will be essential for the government’s plans to use digital record keeping and filing to close the £9 billion tax gap attributed to avoidable mistakes.
In the long term, it is likely that the aim of reducing the tax gap will bring Corporation Tax onto the MTD system too but for the time being we must wait and see what MTD for Income Tax will bring.
For more information