MTD for Vat: It’s all about error reduction but what errors?
As we are rapidly closing in on the MTD “D Day” for Vat from April 2019 I’ve been reviewing all the output on the subject and seriously I’m astonished at just how many hoops we as accountants and our clients are going to have to jump through to simply file a Vat Return comprising 9 boxes.
This blog is taken from the ICPA website. Dedicated to supporting and promoting the needs of the general practitioner. You can find us at www.icpa.org.uk or email [email protected] or by phone on 0800-074-2896.
Shall we start with the statement that bookkeeping in a digital format makes gross good sense to me as an Accountant and as a businessman. I have absolutely nothing against the notion at all, in fact I’m all for it. Where I take issue is the mandatory nature of the provisions because I am firmly on the side of make digital filing available, make it as easy as possible, make it so simple and smooth that businesses and taxpayers alike will opt in to the system because they will see the benefits available. Sadly, that is not what is happening, as it stands Vat digital filing is being mandated from April 2019 like it or, unless you are capable of invoking one of the very few exemptions available, lump it.
Here are a few comments that HMRC have issued about the process:
“By mandating digital record-keeping and filing, the government expects to reduce the amount of tax lost through error” and “Under MTD for VAT, functional compatible software will be used to maintain the mandatory digital records, calculate the return and submit it to HMRC via an Application Programme Interface or ‘API’ for short” and “The complete set of digital records to meet MTDfB requirements do not all have to be in one piece of software. If there is a digital link between the pieces of software, records can be kept in a range of compatible digital formats.”
In a nutshell HMRC are fixating on “Digital” because it seems that only when humans become involved in the process of filing a Return do errors happen. If you believe this the obvious answer is to reduce human input to a minimum and errors will magically disappear. By errors we can only assume that they mean errors in the 9 boxes actually submitted to HMRC that constitute a valid Return. The composition of these individual boxes is not returned just the answers which has and will continue to be the case so HMRC cannot be complaining about them. The errors they are complaining about must be that when boxes 1 and 2 are added they do not actually equal the value placed in box 3 and that the result in box 5 is not equal to box 3 minus box 4.
That’s it. There are no other calculations to get wrong on a return. There is no way of knowing there are errors in the composition of any of the individual boxes so to put an end to apparently 2 calculations possibly millions of businesses are going to have to invest in as yet unseen bridging software or to give it another name “Hocus Pocus” software to stop human input errors in 9 boxes.
We have yet to catch sight of this wonderful software and to date no one has come up with the supposed free version so I think there is going to be a lot more trauma and the penalty free period will be stretched out as everyone is juggling their records like the Chuckle Brothers, to me to you.
Just a closing thought to end this piece. MTD for vat is mandatory for vat registered businesses with a turnover in excess of the vat registration threshold but not for those voluntary vat registered businesses. Therefore they will be able to fulfil their legal requirement to file a Return presumably as they do now by typing in the 9 boxes. If a business was struggling with the MTD aspect and filed the old way what would happen? Would the Return be rejected? Would penalties ensue? Actually, like virtually everything to do with MTD there is no answer.
By Tony Margaritelli (ICPA, Chairman)