Get ready to scramble. Monday 29 July 2019 is the last day that stagger one businesses can sign up to MTD, if they pay their quarterly VAT bills by direct debit.
Deadlines leap forward
The first quarterly VAT returns required to be submitted under MTD are for the quarter: 1 April to 30 June 2019 – this is known as the stagger one period. Stagger two is the quarter 1 May to 31 July, and stagger three relates to the quarter from 1 June to 31 August.
The filing deadline for stagger one VAT returns is 7 August, but the effective deadline for those businesses who have not taken part in the MTD pilot is either:
Monday 29 July – for those who pay by direct debit
Tuesday 4 August – for those who pay by electronic transfer
Why the DD delay?
As part of the switch to the new MTD computer system, all the payments of VAT made in association with MTD returns are being collected by a different HMRC bank account. It takes the bank seven working days to move the direct debit authorisation from HMRC’s old bank account to the new MTD-related bank account; hence the deadline for signing-up for MTD needs seven clear working days before the filing deadline.
Most businesses give HMRC permission to set up a direct debit to pay their VAT, as this ensures they never miss a payment deadline, assuming there are sufficient funds in the business bank account.
Vital email address
If you sign up your client to MTD, rather than the business doing this by itself through its business tax account (BTA), you must provide a contact address for that client. Where the client is planning to pay their VAT by direct debit you must provide a working email address for the client.
The business owner must agree to the terms and conditions of a new direct debit authorisation. This authorisation request is sent to the email address provided as part of the MTD sign-up process. You cannot provide this authorisation on behalf of your client, so you should not provide an email address for the client you control. If the client does not have access to a working email system, they should claim exemption from MTD filing (see VAT Notice 700/22 para 3).
72 hours or more
Where a business pays its VAT by electronic transfer, and not by direct debit, the last day for a stagger one business to sign-up to MTD is Sunday 4 August. This is because HMRC can take up to 72 hours to confirm that the business has been registered for MTD.
On 24 and 25 July there were delays to HMRC sending out email confirmations of the MTD sign-up. That problem should be fixed by now. You should not attempt to submit a VAT return under MTD until the confirmation email has been received from HMRC.
Don’t sign up too early
For those businesses on annual VAT returns and stagger three periods there is still the danger of signing up for MTD too early. Those businesses must make sure the direct debit for the last non-MTD period has been paid before signing up for MTD.
If the business signs up too early, after the last non-MTD VAT return has been submitted but before the direct debit payment has been taken, that payment may not flow through to HMRC and the business could be landed with a surcharge penalty for late payment.
The key dates for stagger two and stagger three businesses are:
Stagger two – VAT return for quarter to 30 April is due 7 June, the direct debit should have been taken on 10 June. The business must sign up to MTD to submit the next VAT return for period to 31 July by midnight on Thursday 29 August 2019.
Stagger three – VAT return for quarter to 30 May is due by 7 July, the direct debit will be taken on 10 July. The business must sign up to MTD to submit the next VAT return for the period to 31 August by Friday 27 September 2019.
Those businesses who submit an annual VAT return and make payments on account are part of the group which have a deferred start date to the first period beginning on or after 1 October 2019. Some MTD-compatible software is not ready to submit annual VAT returns yet, but HMRC can receive them as part of the MTD pilot.